Soon after beginning the year-end audit work on January 10 at the Wiltjer Company, the auditor has the following conversation with the controller. Controller: Auditor: Controller: Auditor: Controller: Auditor: Controller: Auditor: Controller: The year ended December 31st should be our most profitable in history and, as a consequence, the Board of Directors has just awarded the officers generous bonuses. I thought profits were down this year in the industry, according to your latest interim report. Well, they were down but 10 days ago we closed a deal that will give us a substantial increase for the year. Oh, what was it? Well, you remember a few years ago our former president bought stock in Pearson Enterprises because he had grandiose ideas about acquiring Pearson and becoming a conglomerate. For 6 years we have not been able to sell this stock, which cost us $3,000,000 and has not paid a nickel in dividends. On December 12th, we sold this stock to Davis, Inc. for $4,000,000. So, we have a gain of $790,000 ($1,000,000 pretax) which will increase our net income for the year to $4,000,000 compared with last year's $3,800,000. As far as I know, we'll be the only company in the industry to register an increase in net income this year. That should help the market value of our stock! Did you receive the $4,000,000 in cash by December 31st, your year-end? No. Although Davis is an excellent company, they are a little tight for cash because of their rapid growth. Consequently, they are going to give us a $4,000,000 noninterest-bearing note due $400,000 per year for the next 10 years. The first payment is due on December 12th of next year. Why is the note noninterest-bearing? Because that's what everybody agreed to. Since we don't have any interest-bearing debt, the funds invested in the note do not cost us anything and besides, we were not getting any dividends on the Pearson Enterprises stock. Also, with interest rates as low as they currently are, what does it matter? REQUIRED:Do you agree with the way the controller has accounted for the transaction? If not, how should the transaction be accounted for? Your response should be typed, double-spaced, and no more than one page in length. You should also cite appropriate authoritative guidance from the FASB Accounting Standards Codification.