On January 1, a 7-year, $8,000, non-interest-bearing note payable was issued when the market rate of interest was 7%. What amount should be recorded for the note on the balance sheet at the issue date?

Question

Quizplus · Accepted Answer

To calculate the amount of the non-interest-bearing note payable, we need to find the present value (PV) of the future payments using the market rate of interest.
PV = FV / (1 + i)n
PV = 8,000 / (1 + 0.07)7
PV = $4,982
Therefore, the amount recorded for the note on the balance sheet at the issue date is $4,982. Answer choice B is correct.

On January 1, a 7-Year, $8,000, Non-Interest-Bearing Note Payable Was