Chapter 7 Interest Bearing note

On January 1, 2017, Smith Corp. makes a loan to Jones Co. and receives in exchange a three-year, $5,000 note bearing interest at a rate of 12% per year. The market rate of interest for a note of similar risk is 15%. Instructions: (round to nearest dollar) 1. What is the face amount of the note? 2. What is the stated interest rate? 3. Calculate the annual interest payment. 4. Calculate the present value of the note. 5. Prepare the journal entry to record the receipt of the note. 6. Prepare the Schedule of Note Discount Amortization table using the effective-interest method for this note. 7. Prepare the journal entries to record interest revenue at the end of year 1,2,3. 8. Prepare the journal entry to record the repayment of the note at end of year 3