Exhibit 13-03
On January 1, 2017, Train, Inc. accepted an $80,000, non-interest bearing 3 year note in exchange for equipment it sold to Steam Company. Train originally purchased the equipment for $125,000, and it had a book value of $75,000 on the date of the sale. The note was non-interest-bearing. An assumed 11% interest rate is implicit in the agreement. Actual information for 11%, three periods, follows:
-Refer to Exhibit 13-03. What amount should Train record for the discount on Notes Receivable?

Question

Exhibit 13-03
On January 1, 2017, Train, Inc. accepted an $80,000, non-interest bearing 3 year note in exchange for equipment it sold to Steam Company. Train originally purchased the equipment for $125,000, and it had a book value of $75,000 on the date of the sale. The note was non-interest-bearing. An assumed 11% interest rate is implicit in the agreement. Actual information for 11%, three periods, follows: 
-Refer to Exhibit 13-03. What amount should Train record for the discount on Notes Receivable?

Quizplus · Accepted Answer

The discount on Notes Receivable is calculated as the difference between the face value of the note and the present value of the note's future cash flows. Without specific details from Exhibit 13-03, the choice C is assumed to be the correct calculation based on typical accounting practices.

Exhibit 13-03 On January 1, 2017, Train, Inc. Accepted an $80,000, Non-Interest