Question
Problems 8-8 Imputing interest on a nominal interest-bearing note and fair value option (LO 8-4, LO 8-5) On January 2, 2017, Criswell Acres purchased from
Problems 8-8 Imputing interest on a nominal interest-bearing note and fair value option (LO 8-4, LO 8-5)
On January 2, 2017, Criswell Acres purchased from Mifflinburg Farm Supply a new tractor that had a cash selling price of $109,837. As payment, Criswell gave Mifflinburg Farm Supply $25,000 in cash and a $100,000, five-year note that provided for annual interest payments at 6%. At the time of the sale, the interest rate normally charged to farms with Criswells credit rating is 10%. Use the following links to the present value tables to calculate answers. (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.)
Required:
Determine the note receivable balance that Mifflinburg Farm Supply will report on December 31, 2018.
Determine Mifflinburg Farm Supplys note receivable balance on December 31, 2018, assuming that the company reports notes receivable at fair value and the relevant rate of interest at that time has fallen to 8%. Assume that the December 31, 2018, interest payment has been made.
(Round your final answers to the nearest whole dollar.)
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