2 3 4 Example 14,5: IN Min Corporation, a calendar year company, borrowed $1 000 000 on August 15, 2015. The note specifies an 8% interest rate and is due in three years n eres spadaua erly The fiscal year ends on December 31. The current market rate is 12%. Interest is compounded quarterly. IN Min prepares quarterly financial statements. Prepare the amortization table for the note and the journal entries for 2015. N IVY PV PMT FV Excel Formula Given 12 300% 20,000-1,000,000 9 10 Solve for PV 900,460 PV(0.03,12,-20000.-1000000 When we issue this notes payable, we promise to pay (1) Cash Interest every quarter Face Value of the Notes Payable x Qaurterly stated rate (2) Principal of $1,000,000 at the end of the 3rd year Every Quarter we will pay cash interest 7 Annual Market Interest Rate al 12% 9 Annual Stated Interest Rate Quarterly Market Interest Rate Quarterly Stated Interest Rate Number of Quarters FV 8% 1 Years Sheet IN nnual Market Interest Rate Quarterly Market Interest Rate Quarterly Stated Interest Rate Number of Quarters Face Value of the Notes Payable Present Value of the Notes Payable 12% nnual Stated Interest Rate FV ears The notes payable is issued at a discount of -Face Value Present Value of the Notes Payable -Prior Carrying Value x Quarterly Market Interest Rate Effective Interest Period Date Cash Interest Discount Amortized Carrying Value (Prior CV+ Discount amortized) Initial CV PV of the Notes Payable 0 8/15/2015 1 11/15/2015 2 2/15/2016 3 5/15/2016 4 8/15/2016 Sheet1 t-20 PM O Type here to search x ^443/12/201, -Prior Carrying Value x Quarterly Market Interest Rate Effective Interest Period Date Cash Interest Discount Amortized Carrying Value(Prior CV+ Discount amortized) 0 8/15/2015 1 11/15/2015 Initial CV PV of the Notes Payable 2 2/15/2016 3 5/15/2016 4 8/15/2016 5 11/15/2016 6 2/15/2017 7 5/15/2017 8 8/15/2017 9 11/15/2017 10 2/15/2018 11 5/15/2018 12 8/15/2018 a Face Value