Consider the three notes payable listed here Each was issued on January 1, 2018, and matures on December 31, 2020 Interest payments are made annually on December 31 REQUIRED a Compute the present value of the remaining cash outflows for each note at 1 1 18, 12 31 18 and 12 31 19 b Compute the balan...

a Note A 1118 123118 Present value i 6 n 3 Present value i 6 n 2 PV of face value PV of face value 1000 83962 83962 1000 89000 89000 PV of interest payment PV of interest payment 100 267301 26730 100 ...

Consider the three notes payable listed here. Each was issued on January 1, 2018, and matures on

Question:

Consider the three notes payable listed here. Each was issued on January 1, 2018, and matures on December 31, 2020. Interest payments are made annually on December 31. Note Effective Interest Rate Face Value Stated Interest Rate $1,000 10% 6% $1,000 10 10 $1,000 10

Note Effective Interest Rate Face Value Stated Interest Rate $1,000 10% 6% $1,000 10 10 $1,000 10

REQUIRED:
a. Compute the present value of the remaining cash outflows for each note at 1/1/18, 12/31/18 and 12/31/19.
b. Compute the balance sheet values of each note payable at each of the above dates, using the effective interest method.
c. Compute the balance sheet values of each note payable at each of the above dates, using the straight-line method (i.e., amortize an equal amount of the discount or premium each year).
d. Why is the effective interest method preferred to the straight-line method for financial reporting purposes?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

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