On December 31, 2016, Ashton Corporation performed forensic psychic consultation

Question

On December 31, 2016, Ashton Corporation performed forensic psychic consultation services for the Edamame Private Detective Agency. Ashton was short of cash, and Ashton agreed to accept a $200,000 note receivable due December 31, 2018, bearing interest at 8% payable semi-annually. The market rate for a note of similar risk is 6%.

What interest rate would you use to compute the cash interest payment?

What interest rate would you use to compute the present value of the note?

Calculate the present value of the note receivable:

Provide the journal entry for the issue of the note receivable:

Explanation / Answer

Interest rate would you use to compute the cash interest payment 8% interest rate would you use to compute the present value of the note 6% Present Value of Note Receivable =(200000*8%)/(0.06) 266666.7 Cash 200000            To Note Receivable 200000

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