Lab 4 - Chapter 7 Question 7 of 7 -/21 = Assume that Pharoah Corp. makes...
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Lab 4 - Chapter 7 Question 7 of 7 -/21 = Assume that Pharoah Corp. makes a loan to Marie Co. and receives in exchange a $11,200, three-year note bearing interest at 8% annually. The market rate of interest for a note of similar risk is 10%. Click here to view factor tables Over the term of the note, Pharoah Corp. will receive $896 interest each year (a rate of 8%) and at maturity will get $557 more than the cash originally loaned. This $557 (the discount) effectively increases the return on the investment from 8% to 10%. It is amortized each period and the amount of interest income that is recognized is greater than the $896 received each year. (a) Prepare a three-year discount amortization and interest income schedule assuming Pharoah follows IFRS and uses the effective interest method. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and final answer to O decimal places, e.g. 1,525.) Schedule of Note Discount Amortization Effective Interest Method 8% Note Discounted at 10% Cash Received Interest Income Date of issue End of $ +A Year 1 $ $ End of Year 2 Discount Amortized $ Carrying Amount SUPPO Lab 4 - Chapter 7 Question 7 of 7 -/21 = Assume that Pharoah Corp. makes a loan to Marie Co. and receives in exchange a $11,200, three-year note bearing interest at 8% annually. The market rate of interest for a note of similar risk is 10%. Click here to view factor tables Over the term of the note, Pharoah Corp. will receive $896 interest each year (a rate of 8%) and at maturity will get $557 more than the cash originally loaned. This $557 (the discount) effectively increases the return on the investment from 8% to 10%. It is amortized each period and the amount of interest income that is recognized is greater than the $896 received each year. (a) Prepare a three-year discount amortization and interest income schedule assuming Pharoah follows IFRS and uses the effective interest method. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and final answer to O decimal places, e.g. 1,525.) Schedule of Note Discount Amortization Effective Interest Method 8% Note Discounted at 10% Cash Received Interest Income Date of issue End of $ +A Year 1 $ $ End of Year 2 Discount Amortized $ Carrying Amount SUPPO
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Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
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