Trader Trust Accepts a $500,000 Non-Interest Bearing 10-Year Note from Coffee

question 108

Multiple Choice

Trader Trust accepts a $500,000 non-interest bearing 10-year note from Coffee Co.in exchange for Cash on 1/1/16.Coffee Co.promises to repay $500,000 at maturity.The market rate on 1/1/16 was 4%.What is the carrying value of this note on the balance sheet on 12/31/16?

• A)$500,000
• B)$337,782
• C)$351,293
• D)$324,271

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Definitions:

Labor Hours

The total number of hours worked by all employees of a company.

Acceptance

In contract law, the offeree's indication to the offeror that the offeree agrees to be bound by the terms of the offeror’s offer or proposal to form a contract.

Offer

A promise or commitment to do or refrain from doing some specified thing in the future.

Breach of Contract

The violation of a contractual obligation or a failure to perform any promised act or obligation.