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Unformatted text preview: y ears . Ignore inc ome tax es . (Om it the "$" sign in your re sponse .)
The c ombined net inc ome of the nex t five y ears will be unde rsta te d by $ 36,000 . Learning Objective: B-05 Com pute the pres ent values of
future cas h flows . W orksheet Learning Objective: B-06 Dis cus s accounting applications
of the concept of pres ent value. Us e Table PV-1 (in Ex hibit B-7) and Table PV-2 (in Ex hibit B-9)
On Dec ember 31, Ric hland Farms s old a trac t of land, whic h had c os t $930,000, to Sk y line Developers
in ex c hange for $150,000 c as h and a five-y ear, 4 perc ent note rec eivable for $900,000. Interes t on the
note is pay able annually , and the princ ipal amount is due in five y ears . The ac c ountant for Ric hland
Farms did not notic e the unrealis tic ally low interes t rate on the note and made the following entry on
Dec ember 31 to rec ord this s ale.
Notes Rec eivable
Gain on Sale of Land
Sold land to Sk y line Developers in ex c hange for c as h and five-y ear
note with interes t d...
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- Fall '08