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Kenneth Halabi is a financial executive with Pharoah Enterprises. Although Kenneth has not had any formal training in finance accounting, he has a good sense for numbers and has helped the company grow from a very small company ($540,000 in sales) a large operation ($48.60 million in sales). With the business growing steadily, however, the company needs to make a number a difficult financial decisions in which Kenneth feels a little over his head. He therefore has decided to hire a new employee with numbers expertise to help him. As a basis for determining whom to employ, he has decided to ask each prospective employee to prepare answers to questions relating to situations he has encountered recently. The following are the facts for the second question asked of prospective employees. Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $14,300 per year for nine years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 10% (market rate). At the time the land was originally purchased, it cost $85,800. Click here to viour stable DOCCI

Kenneth Halabi is a financial executive with Pharoah Enterprises. Although Kenneth has not had any formal training in finance accounting, he has a good sense for numbers and has helped the company grow from a very small company ($540,000 in sales) a large operation ($48.60 million in sales). With the business growing steadily, however, the company needs to make a number a difficult financial decisions in which Kenneth feels a little over his head. He therefore has decided to hire a new employee with numbers expertise to help him. As a basis for determining whom to employ, he has decided to ask each prospective employee to prepare answers to questions relating to situations he has encountered recently. The following are the facts for the second question asked of prospective employees. Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $14,300 per year for nine years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 10% (market rate). At the time the land was originally purchased, it cost $85,800. Click here to viour stable DOCCI

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ee 117.

Kenneth Halabi is a financial executive with Pharoah Enterprises. Although Kenneth has not had any formal training in finance or accounting, he has a good sense for numbers and has helped the company grow from a very small company ($540,000 in sales) to a large operation ($48.60 million in sales). With the business growing steadily, however, the company needs to make a number of difficult financial decisions in which Kenneth feels a little over his head. He therefore has decided to hire a new employee with numbers expertise to help him. As a basis for determining whom to employ, he has decided to ask each prospective employee to prepare answers to questions relating to situations he has encountered recently. The following are the facts for the second question asked of prospective employees. Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $14,300 per year for nine years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 10% (market rate). At the time the land was originally purchased, it cost $85,800. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Calculate the fair value of the note using IFRS 13 on the date of the exchange. Hint: discount the payments at the market rate of interest to find the present value of the note. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places, e.g. 5,275.25.) Fair value of the note under IFRS 13
Transcribed Image Text:Kenneth Halabi is a financial executive with Pharoah Enterprises. Although Kenneth has not had any formal training in finance or accounting, he has a good sense for numbers and has helped the company grow from a very small company ($540,000 in sales) to a large operation ($48.60 million in sales). With the business growing steadily, however, the company needs to make a number of difficult financial decisions in which Kenneth feels a little over his head. He therefore has decided to hire a new employee with numbers expertise to help him. As a basis for determining whom to employ, he has decided to ask each prospective employee to prepare answers to questions relating to situations he has encountered recently. The following are the facts for the second question asked of prospective employees. Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $14,300 per year for nine years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 10% (market rate). At the time the land was originally purchased, it cost $85,800. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Calculate the fair value of the note using IFRS 13 on the date of the exchange. Hint: discount the payments at the market rate of interest to find the present value of the note. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places, e.g. 5,275.25.) Fair value of the note under IFRS 13
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