Exhibit 13-03 On January 1, 2014, Train, Inc. accepts 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 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 would Train show as the balance for Discount on Notes Receivable on December 31, 2015?

Question

Exhibit 13-03 On January 1, 2014, Train, Inc. accepts 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 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 would Train show as the balance for Discount on Notes Receivable on December 31, 2015?

Quizplus · Accepted Answer

The balance for Discount on Notes Receivable is calculated by subtracting the present value of the note from its face value. The correct amount is $7,928.

Exhibit 13-03 on January 1, 2014, Train, Inc