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10. On January 1, 2018, Sunland Company sold property to Blossom Company. There was no established exchange price for the property, and Blossom gave Sunland a S4700000 zero-interest- bearing note payable in 5 equal annual installments of $940000, with the first payment due December 31, 2018. The prevailing rate of interest for a note of this type is 9%. The present value of the note at 990 was $3656318 at January 1, 2018. What should be the balance of the Discount on Notes Payable account on the books of Blossom at December 31, 2018 after adjusting entries are made, assuming that the effective-interest method is used? Answer:
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Answer is highlighted in yellow, can be rounded per question requirement, e.g. nearest dollar: Solution Answer: 714613 Explanation: Intial discount on note payable (4700000- 3656318) Less: Amortization during 2018 (3656318*9%) Balance of discount on note payable, Dec.31, 2018 1043682 329069 714613 or: 714613.38

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