Question

Exercise 7-13 On July 1, 2017, Tamarisk Inc. made two sales. 1. It sold land having a fair value of $915,580 in exchange for a 3-year zero-interest-bearing promissory note in the face amount of $1,252,178. The land is carried on Tamarisk's books at a cost of $598,400. 2. It rendered services in exchange for a 5%, 6-year promissory note having a face value of $406,500 (interest payable annually). Tamarisk Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 11% interest. Record the two journal entries that should be recorded by Tamarisk Inc. for the sales transactions above that took place on July 1, 2017

Answer 1

Fast Deliveries INC
Journal Entries
Accounts Title				Debit	Credit
Notes payable a/c Dr				1252178
to land***					598400
to discount on notes receivable***					336598
to   gain on disposal of land (915580-598400)					317180
Notes receivable a/c Dr				406500
to discount on notes receivable					103200
to service revenue					303300
*** discount on notes receivable=( 1252178-915580)= 336598
interest per year = 406500*5% = 20325
calculation of service revenue
years	cash flow	pv @11%	present value
1	20325	0.9009	18311
2	20325	0.8116	16496
3	20325	0.7312	14862
4	20325	0.6587	13388
5	20325	0.5935	12063
6	20325	0.5346	10866
6	406500	0.5346	217315
			303300