Question

Savannah Corp. sold property in exchange for a six-year note that has a maturity value of...

Savannah Corp. sold property in exchange for a six-year note that has a maturity value of $40,250 and no stated interest rate. The property originally cost Savannah $29,000. Assuming that a market interest rate of 9% is known, prepare the journal entry to record the sale of this property.

In this case, the proceeds from the sale are equal to the present value of the note.

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Answer #1
Note amount 40250
Multiply: PVF at n= 6, I = 9% 0.596267
Present value of note /Sale value of asset 24000
Cost of asset 29000
Loss on sale of assets 5000
Journal entry
S.no. Accounts title and explanations Debit $ Credit $
a. Note receivable 40250
Loss on sale of assets 5000
     Land property account 29000
     Discount on note receivable (40250-24000) 16250
(for sale of property )
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