Two independent situations follow.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.
(a)
On January 1, 2023, Martinez Inc. bought land that had an assessed value of $390,000 at the time of purchase. A $625,000, non-
interest-bearing note due on January 1, 2026, was given in exchange. There was no established exchange price for the land and no
ready market value for the note. The interest rate that is normally charged on a note of this type is 10%.
Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, determine at what amount the land should be recorded at
January 1, 2023. (Hint: Refer to Chapter 3 for tips on calculating.) Determine the interest expense to be reported in 2023 related
to this transaction. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g.
58,971.)
Cost of land to be recorded
$
Interest expense to be recorded
$