Here is a solution to a question in my textbook. My question is ... How do you figure out the Non interest bearing note if I am not given a discount rate???

Notes Receivable (Interest-bearing note vs. noninterest-bearing note)

Example: INTEREST-BEARING NOTES

The Stridewell Wholesale Shoe Company manufactures athletic shoes that it sells to retailers. On May 1, 2016, the company sold shoes to Harmon Sporting Goods. Stridewell agreed to accept a $700,000, 6-month, 12% note in payment for the shoes. Interest is payable at maturity. Stridewell would account for the note as follows:

To record the sale of goods in exchange for a note receivable.

May 1, 2016

Notes receivable............................................................................................................. 700,000

Sales revenue........................................................................................................... 700,000

To record the collection of the note at maturity.

November 1, 2016

Cash ($700,000 + 42,000)......................................................................................... 742,000

Interest revenue ($700,000 x 12% x 6/12)...................................................... 42,000

Notes receivable...................................................................................................... 700,000

If the sale in the above illustration occurs on August 1, 2016, and the company's fiscal year-end is December 31, a year-end adjusting entry accrues interest earned.

December 31, 2016

Interest receivable.............................................................................................................. 35,000

Interest revenue ($700,000 x 12% x 5/12)....................................................... 35,000

February 1, 2017

Cash [$700,000 + ($700,000 x 12% x 6/12)]........................................................... 742,000

Interest revenue ($700,000 x 12% x 1/12)...................................................... 7,000

Interest receivable (accrued at December 31).......................................................... 35,000

Note receivable ............................................................................................................. 700,000

EXAMPLE: NONINTEREST-BEARING NOTES

If the preceding note could be packaged as a $700,000 noninterest-bearing note, with a 12% discount rate.

May 1, 2016

Note receivable (face amount).................................................................................................... 700,000 Discount on note receivable ($700,000 x 12% x 6/12)................................................ 42,000 Sales revenue (difference).................................................................................................... 658,000

November 1, 2016

Discount on note receivable ....................................................................................................... 42,000 Interest revenue ...................................................................................................................... 42,000 Cash ................................................................................................................................................. 700,000 Note receivable (face amount)............................................................................................. 700,000

If the sale occurs on August 1, the December 31, 2016, adjusting entry and the entry to record the cash collection on February 1, 2017, are recorded as follows:

December 31, 2016

Discount on note receivable ....................................................................................................... 35,000 Interest revenue ($700,000 x 12% x 5/12)...................................................................... 35,000 February 1, 2017

Discount on note receivable ....................................................................................................... 7,000 Interest revenue ($700,000 x 12% x 1/12)...................................................................... 7,000 Cash ................................................................................................................................................. 700,000 Note receivable (face amount)............................................................................................. 700,000