Question

On December 31, 2017, Swan Company sold for $150,000 an old machine having an original cost of $170,000 and a book value of $120,000. The terms of the sale were as follows: $30,000 down payment $60,000 payable on December 31 each of the next two years The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable net of the unamortized discount on December 31, 2017 rounded to the nearest dollar

Answer 1

the amount of the notes receivable net of the unamortized discount is $105,546

Step-by-step explanation:

The computation of the amount of the notes receivable net of the unamortized discount is shown below:

= AMount payable for next two years × present value of an ordinary annuity at 9% for 2 years

= $60,000 × 1.75911

= $105,546

hence, the amount of the notes receivable net of the unamortized discount is $105,546