Question

On January 1, 2017, Crown Company sold property to Leary Company. There was no established exchange...

On January 1, 2017, Crown Company sold property to Leary Company. There was no established exchange price for the property, and Leary gave Crown a $400,000 zero-interest-bearing note payable, promising 5 equal annual installments of $80,000, with the first payment due December 31, 2017. The prevailing rate of interest for a note of this type is 8%. What is the carrying value of the notes payable at 12/31/17, after the first payment is made (assuming that the effective-interest method is used)? Choose the amount closest to your own calculation. Suggestion: prepare a complete amortization schedule like we did in class.

  1.    $319,417
  2.    $259,177
  3.    $264,970
  4.    $320,000

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