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EXERCISE 715
1. Notes Receivable.
................................
1,101,460
Discount on Notes Receivable.
.
401,460
Land.
............................................
590,000
Gain on Sale of Land .
................
110,000
($700,000 – $590,000)
$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
Using a financial calculator:
PV
?
yields $(699,998)
I
12%
N
4
PMT

FV
$ 1,101,460
Type
0
Excel formula: =PV(rate,nper,pmt,fv,type)
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View Full DocumentEXERCISE 715 (Continued)
2.
Notes Receivable.
................................
400,000
Discount on Notes Receivable.
.
178,836
Service Revenue .
.......................
221,164
Calculation of the present value of
the note:
Maturity value
400,000
Present value of $400,000 due
in 8 years at 12%—$400,000
X .40388
$161,552
Present value of $12,000
payable annually for 8 years
at 12% annually—$12,000
X 4.96764
59,612
Present value of the note and
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 Spring '11
 Wolfson

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