On January 1, 2010, Crabb & Co. sold land to Chiles, Inc. in exchange for a note

Question

On January 1, 2010, Crabb & Co. sold land to Chiles, Inc. in exchange for a note with a maturity value of $500,000. The note is due December 31, 2012 and interest is owed each December 31 at a rate of 6%. Chiles

On January 1, 2010, Crabb & Co. sold land to Chiles, Inc. in exchange for a note with a maturity value of $500,000. The note is due December 31, 2012 and interest is owed each December 31 at a rate of 6%. Chiles' market rate of borrowing is 12%. Crabb originally purchased the land for $80,000 in 1978.

Explanation / Answer

PARTICULARS VALUE PRESENT VALUE FACTOR PRESENT VALUE NOTE COST 500000 0.797 398500 INTEREST ON 31 DEC 2011 30000 0.893 26790 INTEREST ON 31 DEC 2012 30000 0.797 23910 449200 FAIR MARKET VALUE OF LAND $449,200

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