1/30/2014Assignment Print Viewhttp://ezto.mhecloud.mcgraw-hill.com/hm_accounting.tpx?todo=printview20/2118.aw ard:0.62 out of1.00 pointUse Table PV-1 (in Exhibit B-7) and Table PV-2 (in Exhibit B-9)On December 31, Richland Farms sold a tract of land, which had cost $930,000, to Skyline Developersin exchange for $150,000 cash and a five-year, 4 percent note receivable for $900,000. Interest on thenote is payable annually, and the principal amount is due in five years. The accountant for RichlandFarms did not notice the unrealistically low interest rate on the note and made the following entry onDecember 31 to record this sale.General JournalDebitCreditCash150,000 Notes Receivable900,000 Land930,000 Gain on Sale of Land120,000 Sold land to Skyline Developers in exchange for cash and five-yearnote with interest due annually.a.Compute the present value of the note receivable from Skyline Developers at the date of sale,assuming that a realistic rate of interest for this transaction is 12 percent. (Hint: Consider both theannual interest payments and the maturity value of the note.)
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