Answer:
Riverbed Inc.
Journal Entries:
1. Debit 0% 4-year Promissory Notes Receivable $1,435,565
Credit Land $597,200
Credit Gain on Sale of Land $315,130
Credit Interest Revenue $523,235
To record the sale of land in exchange for a note with face value of $1,435,565
2. Debit 3% 8-year Promissory Note Receivable $401,660
Credit Service Revenue $162,224
Credit Interest Revenue $239,436
To record the rendering of service in exchange for a note with face value of $401,660.
Explanation:
a) Data and Analysis:
July 1, 2020:
1. 0% 4-year Promissory Notes Receivable $1,435,565 Land $597,200 Gain on Sale of Land $315,130 Interest Revenue $523,235
From an online financial calculator, the PV and Interest:
N (# of periods) 4
I/Y (Interest per year) 12
PMT (Periodic Payment) 0
FV (Future Value) 1435565
Results
PV = $912,330
Total Interest $523,235
Gain on Sale of Land:
Fair value of the land = $912,330
Book value of the land 597,200
Gain on sale of land = $315,130
2. 3% 8-year Promissory Note Receivable $401,660 Service Revenue $162,224 Interest Revenue $239,436
From an online financial calculator, the PV and Interest:
N (# of periods) 8
I/Y (Interest per year) 12
PMT (Periodic Payment) 0
FV (Future Value) 401660
Results
PV = $162,224
Total Interest $239,436
