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Calculate the present value of the note on January

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Reference no: EM132654003

Problem - Martinez Corporation is in the business of selling cattle. Due to recent diseases plaguing cattle, Martinez is experiencing a cash shortage. Martinez issued a $252,000, 6-year, zero-interest-bearing note to Little Town Corp. on January 1, 2020, and received $180,000 cash. In addition, to conserve cash, Martinez agreed to sell cattle to Little Town for an amount less than the regular selling price over the 6-year period. The market interest rate for similar notes is 8%. Martinez uses the effective interest method.

Required -

(a) Calculate the present value of the note on January 1 using (1) a financial calculator or (2) Excel function PV.

(b) Prepare Martinez's January 1 journal entry.

Reference no: EM132654003

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