Chapter 7 Notes Receivables Soll - EXERCISE 7-18(1015 minutes 1 Notes Receivable 1,101,460.00 Discount on Notes Receivable Land Gain on Sale of

Chapter 7 Notes Receivables Soll - EXERCISE 7-18(1015...

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EXERCISE 7-18 (10–15 minutes) 1. 7/1/07 Notes Receivable .................................. 1,101,460.00 Discount on Notes Receivable. . 401,460.00 Land .............................................. 590,000.00 Gain on Sale of Land .................. 110,000.00 ($700,000 – $590,000) Computation of the discount $1,101,460 Face value of note .63552 Present value of 1 for 4 periods at 12% $ 700,000 Present value of note 1,101,460 Face value of note $ 401,460 Discount on note receivable 2. 7/1/07 Notes Receivable .................................. 400,000.00 Discount on Notes Receivable. . 178,836.32 Service Revenue ......................... 221,163.68 Computation of the present value of the note: Maturity value $400,000.00 Present value of $400,000 due in 8 years at 12%—$400,000 X .40388 $161,552.00 Present value of $12,000 payable annually for 8 years at 12% annually—$12,000 X 4.96764 59,611.68 Present value of the note 221,163.68 Discount on note receivable $178,836.32 EXERCISE 7-19 (20–25 minutes) (a) Notes Receivable .............................................. 200,000 Discount on Notes Receivable ............... 34,710 1
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Consulting Revenue ............................... 165,290* *Computation of present value of note: PV of $200,000 due in 2 years at 10%
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