On January 1, 2021, Gobert Company sold property to Beasley Company. There was no established exchange price for the property, and Beasley gave Gobert a $751,000 zero-interest- bearing note payable on January 1, 2025. The prevailing rate of interest for a note of this type is 6%. The property had a book value of $341,000 to Gobert. What should be the balance of the Discount on Notes Payable account on the books of Beasley at December 31, 2021 after adjusting entries are made, assuming that the effective-interest method is used?

On January 1, 2021, Gobert Company sold property to Beasley Company. There was no established exchange price for the property, and Beasley gave Gobert a $751,000 zero-interest- bearing note payable on January 1, 2025. The prevailing rate of interest for a note of this type is 6%. The property had a book value of $341,000 to Gobert. What should be the balance of the Discount on Notes Payable account on the books of Beasley at December 31, 2021 after adjusting entries are made, assuming that the effective-interest method is used?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 24E: Notes Receivable and Income On January 1, 2019, Pitt Company sold a patent to Chatham Inc. which had...

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On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9% U.S. Treasury notes for 194,000. The notes mature July 1, 2020, and pay interest semiannually on January 1 and July 1. The notes were sold on December 1, 2019, for 199,000. Aldrich normally uses straight-line amortization on all of its notes. In its income statement for the year ended December 31, 2019, what amount should Aldrich report as a gain on the sale of the available-for-sale security? a. 2,500 b. 3,500 c. 5,000 d. 6,000
On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000
Notes Receivable and Income On January 1, 2019, Pitt Company sold a patent to Chatham Inc. which had a carrying value on Pitts books of 10,000. Chatham gave Pitt a 60,000, non-interest-bearing note payable in five equal annual installments of 12,000 with the first payment due and paid on January 1, 2020. There was no established price for the patent, and the note has no ready market value. The prevailing rate of interest for a note of this type at January 1, 2019, is 12%. Required: 1. Prepare a schedule showing the income or loss before income taxes that Pitt should record for the years ended December 31, 2019 and 2020. Show supporting computations in good form. 2. Next Level If Pitt inadvertently failed to discount the note and instead recorded it at its gross value, what would be the effect on income or loss before income taxes for the year ended December 31, 2019?
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