Question
In: Accounting
On January 1, 2011, Crabb & Co. sold land to Chiles, Inc. in exchange for a...
On January 1, 2011, Crabb & Co. sold land to Chiles, Inc. in
exchange for a note with a maturity value of $500,000. The note is
due December 31, 2013 and interest is owed each December 31 at a
rate of 6%. Chiles’ market rate of borrowing is 12%. Crabb
originally purchased the land for $80,000 in 1978.
Answer the following. Show your work.
1. Was the note issued at a discount or a premium?
2. What is the fair market value of the land?
3. What is the gain or loss on the sale of the land?
4. How does this transaction affect the accounting equation of
Crabb & Co. (Assets = Liabilities + Equity)?
5. What is the amount of interest income recognized by Crabb &
Co. in 2012?
6. What is the amount of cash interest received by Crabb & Co.
in 2012?
7. What is the carrying value of the note receivable on December
31, 2012?
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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