Question
On January 1, 2020, ABC Company loaned cash to XYZ Company in exchange for a note with a face value of $500,000, a stated interest
On January 1, 2020, ABC Company loaned cash to XYZ Company in exchange for a note with a face value of $500,000, a stated interest rate of 4%, and a maturity date of January 1, 2023. Interest payments are due annually beginning on December 31, 2020. The market value of the note on January 1, 2020, based on a 6% effective interest rate, is $473,270. ABC company uses the effective interest method to amortize any discount or premium on notes and Newtons fiscal year end is December 31.
a. Prepare an amortization schedule using the effective interest method. Round to nearest dollar.
b. Record all journal entries from January 1, 2020 through January 1, 2023
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