Question

On July 1, 2020, Blossom Inc. made two sales. 1. It sold land having a fair value of $910,080 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,432,024. The land is carried on Blossom's books at a cost of $591,300. 2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $402,980 (interest payable annually). Blossom 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 12% interest. Record the two journal entries that should be recorded by Blossom Inc. for the sales transactions above that took place on July 1, 202 (Round present value factor calculations to 5 decimal places, eg, 1.25124 and final answers to decimal places, e.g. 5,275. If no entry is require select "No Entry for the account titles and enter for the amounts. Credit account titles are automatically indented when the amount is entered not indent manually.)

Answer 1

Date	Account title	Debit	credit
July 1 2020	Note receivable	1432024
	Discount on note receivable		521944
	Land		591300
	Gain on sale of land		318780
July 1 2020	Note receivable	402980
	Discount on note receivable		115789
	service revenue		287191

#

1)Discount on note receivable = Face value -Fair value

                     = 1432024 - 910080

                      = 521944

Gain on sale = Fair value -book value

                  = 910080 - 591300

                = 318780

2)Annual interest = 402980*3%=12089.4

Present worth of note =[PVA8%,8* Annual interest ]+[PVF3%,8*Face value]

              =[5.74664* 12089.4 ] + [.54027 * 402980]

               = 69473.43+ 217718.00

               = 287191 rounded

Find present value annuity factor and present value table from their table respectively at 8% for 8 periods