Question

Premium Group names:
On Jan 1, 2016, Zahid sold a truck to Othaim in exchange for a $200,000, 6% (payable annually), 5 year, notes payable. On Jan 1, 2016, the market rate was 8%.
		Amortization Table
Date	Cash Received	Int. Revenue	Pre Amrt.	Carrying Value
1-Jan-16
1-Jan-17
1-Jan-18
1-Jan-19
1-Jan-20
1-Jan-21
Requirements:
What is the sale revenue that Zaid should recognize on Jan 1, 2016?
What is the interest revenue that Zaid should recognize on Dec 31, 2016?
What is the Pre Amrt. that Zaid should recognize on Dec 31, 2018?
What is the carrying value of the notes on Dec 31, 2019?
What is the interest receivable related to the notes on Dec 31, 2020?

Answer 1

SOLUTION:-

Face Amount	$ 2,00,000.00
Rate	8%
Period	5
PMT	$12,000.00
Present Value= PV (8%,5,-12,000,-200000)	$ 1,84,029.16
Amortization Schedule
A	B	C	D	G
Period	Cash Received	Interest Revenue.= 8% * Previous BV in G	Amortisation of bond discount (B - C)	Book value of bond previous bal-D
Jan-16				$1,84,029.16
Jan-17	$12,000.00	$14,722.33	$-2,722.33	$1,86,751.49
Jan-18	$12,000.00	$14,940.12	$-2,940.12	$1,89,691.61
Jan-19	$12,000.00	$15,175.33	$-3,175.33	$1,92,866.94
Jan-20	$12,000.00	$15,429.36	$-3,429.36	$1,96,296.30
Jan-21	$12,000.00	$15,703.70	$-3,703.70	$2,00,000.00
	$60,000.00	$75,970,84	$-15,970.84
What is the sale revenue that Zaid should recognize on Jan 1,2016?	$1,84,029.16
What is the interest revenue that Zaid should recognize on Dec-31,2016 ?	$14,722.33
What is the Dis Amrt that Zaid should recognize on Dec 31,2018?	$2,940.12
What is the carrying value of the notes on Dec 31, 2019?	$1,92,866.94
What is the interest receivable related to the notes on Dec 31, 2020?	$12,000.00

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