On January 1, 2018, Jerry's sold land to ASP, Inc. and accepted a 2 year, $500,000 face value note as payment. 6% interest is due each December 31. ASP's market rate of borrowing is 12%. Jerry's originally purchased the land for $80,000 in 2011. Show work on the following questions:
1. Was the note issued at a discount or a premium?
2. What is the fair market value of the land at the date of exchange?
3. What is the gain or loss on the sale of the land?
4. How does this transaction affect Jerry's balance sheet on the date of the exchange (Assets, liabilities, equity)? Please include account names, dollar values, and whether the account increased or decreased.
5. What is the amount of interest income recognized by Jerry's in 2018?
6. What is the amount of cash interest received by Jerry's in 2018?
7. What is the carrying value of the note receivable on December 31, 2018?