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If you have difficulty answering the following questions, learn more about this topic by reading our Present Value of an Ordinary Annuity (Explanation).
Under the accrual basis of accounting, the discount on notes receivable should be reported as interest revenue
Which of the following present value of an ordinary annuity (PVOA) factors are larger?
Company X received a promissory note from Corp Y. The note does not specify any interest and it requires $3,000 to be paid at the end of each year for four 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 calls for two payments of $10,000 each: one on December 31, 2021 and one on December 31, 2022. No interest is specified in the note. Company X computed the present value of the note to be $17,000 as of December 31, 2020.
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