Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Jeremiah Company receives a three-year, $10,000, zero-interest-bearing note, and the related present value with a market interest rate of 9% is $7,721.80. The total
Jeremiah Company receives a three-year, $10,000, zero-interest-bearing note, and the related present value with a market interest rate of 9% is $7,721.80. The total discount of $2,278.20 under the straight-line method is amortized over the three-year period in equal amounts each year. Therefore, the annual amortization is $2,278.203 or $759.40. Schedule of Note Discount Amortization Effective Interest Method 0% Note Discounted at 9% Cash Received Interest Income Discount Amortized Carrying Amount of Note Date of issue $7,721.80 End of Year 1 $0 $694.96 $694.96 8,416.76 End of Year 2 0 757.51 757.51 9,174.27 End of Year 3 0 825.73 825.73 10,000 $0 $2,278.20 $2,278.20 Click here to view factor tables Prepare the entry to record the annual interest for years 1 and 2 under the straight-line method and the effective interest method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as 15.251
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started