Question

Please do it by type not pics.

1.Calculate the carrying value of the Notes Receivable at the end of Year 3 - Quarter 2 using the following information:

$80,000 four-year note with 12% interest. The market rate is 11%.  This note's payments are quarterly and interest also compounds quarterly.

Answer 1

The carrying amount of the Note Receivable at the end of Year 3 - Quarter 2 shall be equal to sum total of PV of all the interest and face value amount to be received starting from Quarter 3 of Year 3. Such PV shall be computed at the market rate of interest which is 11% per annum.

The computation is presented in the table below:

Year	Quarter	Payouts	PV Factor @ 11%	Present Value
3	3	2,400	0.9732	2,336
3	4	2,400	0.9472	2,273
4	1	2,400	0.9218	2,212
4	2	2,400	0.8972	2,153
4	3	2,400	0.8732	2,096
4	4	82,400	0.8498	70,022
Carrying Value at the end of Q2, Year 3				$        81,092

PV factor corresponding to each quarter has been computed using this formula = 1/(1+11%/4)^n where n is period in quarters from the end of Q2, Year 3.