Question

On January 1, year 2, Connor Corporation signed a $100,000 noninterest-bearing note due in three years at a discount rate of 10%. Connor elects to use the fair value option for reporting its financial liabilities. On December 31, year 2, Connor's credit rating and risk factors indicated that the rate of interest applicable to its borrowings was 9%. The present value factors at 10% and 9% are presented below.

PV factor .751 10%, 3 periods
PV factor .826 10%, 2 periods
PV factor .909 10%, 1 periods
PV factor .772 9%, 3 periods
PV factor .842 9%, 2 periods
PV factor .917 9%, 1 periods
At what amount should Connor present the note on the December 31, year 2 balance sheet?

Answer 1

the amount that should present the note in year 2 is $84,200

Step-by-step explanation:

The computation of the amount that should present the note in year 2 is shown below:

= Amount of non-interest bearing note × present value factor for 2 years at 9%

= $100,000 × 0.842

= $84,200

hence, the amount that should present the note in year 2 is $84,200