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on 01/01/17, Jake Co. sold land to Hill Co. accepting a $74,000, 3 year, zero- (or non-) interest bearing note. Original Cost of the land to Kale was $76,000.

Case #1: Assume Fair value of the land on 01/01/17 was not known directly but the effective (or implicit rate) interest rate was 5%.

Present Value: 63,924

Discount on Note: 10076

Implied of implicit fair value of th eland: 63924

Jakes gain (loss) on sale of land: (12076) 63924-76000

PV of Note Jace accepted (received) - Jakes cost of land given

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