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If you have difficulty answering the following questions, learn more about this topic by reading our Present Value of a Single Amount (Explanation).
Under the accrual basis of accounting, when should the discount on notes receivable be reported as interest revenue?
Under the accrual basis of accounting, the discount on notes payable should be reported as interest expense
Which present value factor is larger: the PV of 1 factor for 10% or the PV of 1 factor for 12%?
Company X received a promissory note from Corp Y. The note does not specify any interest and it will be due in three years. Which interest rate should Company X use to discount this note receivable to its present value?
Use the following information for answering Questions 14 - 18.
Company X's accounting year ends on December 31 of each year. On December 31, 2020 Company X received a promissory note from Corp. Y in exchange for services provided by Company X. The fair market value of the services is not known and the fair market value of the note is not known. The note is for $20,000 and it is due on December 31, 2022. No interest is specified in the note. Company X computed the present value of the note to be $16,000 as of December 31, 2020.
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