Fall 2013_Acc 3100_Ch 14

76654 700000 066634 present value price of note

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Unformatted text preview: 0.66634 = Present value (price) of note Present Values $ 200,195 466,438 $ 666,633 present value of $1: n=6, i=7% The accounting treatment is the same whether the amount is determined directly from the market value of the machine or indirectly as the present value of the note. 14-19 Note Exchanged for Assets or Services At the Purchase Date (January 1) Skill Graphics (Buyer/Issuer) Machinery 666,633 Discount on note payable 33,367 Notes payable 700,000 Hughes-Barker (Seller/Lender) Notes receivable 700,000 Discount on notes payable 33,367 Sales revenue 666,633 At the First Interest Date (June 30) Skill Graphics (Buyer/Issuer) Interest expense 46,664 Discount on note payable 4,664 Cash 42,000 Hughes-Barker (Seller/Lender) Cash 42,000 Discount on notes payable 4,664 Investment revenue 46,664 14-20 Installment Notes To compute cash payment use present value To tables. tables. o Each payment includes both an interest Each amount and a principal amount. amount o Interest expense or revenue: o Effective interest rate × Outstanding balance of debt Interest expense or revenue o Principal reduction: Cash amount – Interest component Principal reduction per period 14-21 Installment Notes Notes often are paid in installments, rather than a single amount at maturity. $666,633 amount of...
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This note was uploaded on 11/19/2013 for the course ACCOUNTING 3100 taught by Professor He during the Fall '10 term at CUNY Baruch.

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