Assume the same role as described in P3.4. The following are the facts for the second question asked of prospective employees. Last year the company exchanged a piece of land for a non–interest-bearing note. The note is to be paid at the rate of $15,000 per year for nine years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 11% (market rate). At the time the land was originally purchased, it cost $90,000.

Instructions

a. Calculate the fair value of the note using IFRS 13 on the date of the exchange. Use (1) factor Table PV.2, (2) a financial calculator, or (3) Excel functions in your calculation. Hint: discount the payments at the market rate of interest to find the present value of the note.

b. Prepare the journal entry for the exchange.

c. Prepare the journal entry on the date of the first payment. Ignore any year-end accruals.