Gwen Smith, 64, said she went up to Mary Logie's flat in Leven, Fife, after hearing the noises.
She told a court that the woman accused of the murder, Sandra Weir, had answered the door of Ms Logie's flat.
Ms Weir denies murder and has lodged a special defence of alibi claiming she was elsewhere in Leven at the time.
Ms Smith told the High Court in Edinburgh that she lived directly downstairs from the pensioner and went upstairs to see what was going on after hearing "hammering" noises.
On the third day of the trial, Ms Smith said she had then come across a "horrible situation."
She told prosecution lawyer Alex Prentice QC: "Sandra says to me 'she's fell and there's blood everywhere.'
"I said 'it's alright calm down I will go and see' and then I opened the door and there's Mary."
Ms Smith said that Ms Logie was lying on the floor of her living room.
When Mr Prentice asked her if she saw an item lying nearby, Ms Smith replied: "A rolling pin on the couch."
Ms Weir denies eight charges, including murder.
The trial also heard from a man who told the court he had sold Ms Weir drugs on a number of occasions.
Before giving evidence, Mr Prentice told Aaron Robertson, 44, that if any of his answers implicated him, he guaranteed him immunity from prosecution.
Mr Robertson said Ms Weir was visually impaired and would come to his home with a guide dog to buy drugs.
He said he gave her heroin four or five times in January, charging Â£70 for a 16th of an ounce.
He said Ms Weir had built up a debt of Â£320, which was paid off on 14 January.
The trial at the High Court in Edinburgh continues.

Patrick Clarke said he was standing down from Newry Mourne and Down District Council on medical grounds.
In the past two years, the councillor, from Castlewellan, had been convicted of sexually assaulting a woman at a hotel in Newcastle.
He was convicted of two further charges of defrauding community groups.
He also forced his way into a neighbour's house armed with a hammer.
Last month, he became the first councillor in Northern Ireland to be the subject of an adjudication hearing by the Local Government Commissioner for Standards.
He admitted breaching the councillors' code of conduct and could face a range of possible sanctions including disqualification as a councillor for up to five years.
The hearing was  adjourned to next week for a decision on what punishment the Independent councillor may face.
But he is now submitting his resignation saying he was suffering from depression and "alcohol issues" adding he has now accepted he has to address his problems.
Mr Clarke, who was elected as an Alliance councillor but later resigned from the party, apologised to his family, friends and the electorate.
The neighbour of an 82-year-old woman allegedly beaten to death with a rolling pin has told how she heard "loud bangs" coming from the flat.
[NEXT_CONCEPT]
A councillor with convictions for sexual assault and fraud has quit politics after admitting breaching the local government code of conduct.