[vodrldnr]

This question is form Wiley simulation.

Q. Assume that you are the CPA for Dawson corporation. On Jan1,2010, Catrina corporation sold to Dawson Corporation equipment that originally cost $330,000, with accumulated depreciation of$75,000 for a non-interest bearing note with face value of $300,000 due January1,2014. The fair market value of the equipment is not readily determinable but the market rate for a note of this type is 6%. Dawson depreciate equipment over a 5 year life with no residual value. The present value of the note is $239,630.

————————————————————————

I think note was issued for non monetary asset and interest assumed to be fair due to the market rate. This means that I record note at Face amount with discount or premium taken into account for carrying amount…

Then since the PV of note is 239,630. Discount should be 60370 right???…

But wiley says that discount is 62370. I totally do not understand where the number comes from.

I checked this problem in other Forum and someone says that PV calculation for this problem wrong (300,000 discounted at 6 percent for 4 periods is 237,628.10. Present value of $1 due 4 years from now. Something is missing from the question.).

what do you guys think about this problem???

[Anonymous]

Yes, it looks like a typo to me, as if somebody just typed a number incorrectly. They should have said, “The present value of the note is $237,630.”

[Author]

Replies