White Co. received cash from the following transactions issued on January 1 Year 1. Transaction 1: White received $1,500,000 from a 5-year, zero-interest-bearing promissory note in the face amount of $2,596,122. Transaction 2: White issued a 4% 8-year promissory note having a maturity value of $400,000 with annual interest payments on December 31 of each year. The effective interest rate (market rate at date of issue) of the notes is 8%. PV factor for lump sum in 8 years at 8%: 0.540 PV factor for lump sum in 8 years at 4%: 0.731 PV factor for an annuity in 8 years at 8%: 5.747 PV factor for an annuity in 8 years at 4%: 6.733 What amount of discount should White report on the balance sheet at the end of Year 1 related to Transaction 2 (rounded to the nearest $1,000)? Answer is $83,000
#4 White Co. received cash from the following transactions issued on January 1 Year 1.
Transaction 1: White received $1,500,000 from a 5-year, zero-interest-bearing promissory note in the face amount of $2,596,122.
Transaction 2: White issued a 4% 8-year promissory note having a maturity value of $400,000 with annual interest payments on December 31 of each year.
The effective interest rate (market rate at date of issue) of the notes is 8%.
PV factor for lump sum in 8 years at 8%: 0.540
PV factor for lump sum in 8 years at 4%: 0.731
PV factor for an annuity in 8 years at 8%: 5.747
PV factor for an annuity in 8 years at 4%: 6.733
What amount of discount should White report on the
Answer is $83,000
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