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EXERCISE 14-17 - 4,000,000 Discount on Notes Payable...

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EXERCISE 14-17 (15–20 minutes) (a) Face value of the zero-interest-bearing note .................. $600,000 Discounting factor (12% for 3 periods) ............................ X .71178 Amount to be recorded for the land at January 1, 2011... $427,068 Carrying value of the note at January 1, 2011 ................. $427,068 Applicable interest rate (12%) ........................................... X .12 Interest expense to be reported in 2011 .......................... $ 51,248 (b) January 1, 2011 Cash ............................................................. ......................................................................
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Unformatted text preview: 4,000,000 Discount on Notes Payable. ...................... 1,267,960 Notes Payable. ................................... 4,000,000 Unearned Revenue. ........................... 1,267,960* *$4,000,000 – ($4,000,000 X .68301) = $1,267,960 EXERCISE 14-17 (Continued) Carrying value of the note at January 1, 2011 $2,732,040** Applicable interest rate (10%). .............. X .10 Interest expense to be reported for 2011 $ 273,204 **$4,000,000 – $1,267,960 = $2,732,040...
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