Present Value and Amortization of Note
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On December 31,2011 Green company finished consultation services and accepted in exchange a promissory note with a face value of $500,000, a due date of December 31, 2014, and a stated rate of 8%, with interest receivable at end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%.
Instructions:
a) Determine the present value of the note.
b) Prepare a full Schedule of note discount amortization for Green Company under the effective interest method. (Round to whole dollars)
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Solution Summary
This solution illustrates how to compute the present value of a note and how to prepare an amortization schedule for it.
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