Note with Fair Value Not Equal to Cash Consideration

question 16

Essay

Note with fair value not equal to cash consideration
On January 1, 2020, Tanzania Corp. lent $50,000 to its CEO, interest-free. However, the loan is repayable in five instalments, each December 31, until paid. The market rate for similar loans (with similar credit risk) is 4%.
Instructions
a) Calculate the present value (fair value) of this loan (round to the nearest dollar).
b) Prepare the journal entry to record this transaction.

---

Definitions:

Supplier Selection

The process of identifying, evaluating, and contracting with vendors or suppliers to acquire goods and services for business operations.

Financial Health

A measure of the financial stability and well-being of an entity, often evaluated through metrics like liquidity, solvency, and profitability.

Item Procurement Importance Quadrant

A strategic framework used to categorize procurement items based on their importance and impact on the company's business operations and strategies.

Low Risk

Situations or decisions that are associated with minimal potential for loss, damage, or negative outcomes.