Question

On December 31, 2020, Oriole Company sold for $153000 an old machine having an original cost of $266000 and a book value of $113000. The terms of the sale were as follows: $40000 down payment $56500 payable on December 31 each of the next two years The agreement of sale made no mention of interest; however, 7% would be a fair rate for this type of transaction. What should be the amount of the notes receivable net of the unamortized discount on December 31, 2020 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at 7% for 2 years is 1.80802.)

Answer 1

Answer:

$102,153.13

Explanation:

Amount payable on December 31 each of the next two years = $56,500

The PV of ordinary annuity of ($1,7%,2 years) is 1.80802

The amount of the notes receivable net of the unamortized discount = Amount Payable * PV($1, 7%, 2)

= $56,500 * 1.80802

= $102,153.13

So, the amount of the notes receivable net of the unamortized discount on December 31, 2020 will be $102,153.13.