Question
On January 1, 2022, Slack Company finished legal services and accepted in exchange a 5% $400,000 promissory note with a due date of December 31,
On January 1, 2022, Slack Company finished legal services and accepted in exchange a 5% $400,000 promissory note with a due date of December 31, 2024. Interest is receivable on January 1 of each year. Notes with similar risk have a market rate of interest of 10%.
Set financial calculators to zero decimal place.
Required:
(a) Determine the value of the following:
N =
I/Y =
PMT =
FV =
(b) The present value of the note was
(c) Prepare a Schedule of Note Discount/Premium Amortization for Slack Company under the effective interest method.
| Slack Company | ||||
| Schedule of Note Discount/Premium Amortization | ||||
| Effective Interest Method | ||||
|
Date |
Cash |
Interest | Amortized Amount | Carrying Value of Note |
| Jan 1, 2022 | ||||
| Dec 31, 2022 | ||||
| Dec 31, 2023 | ||||
| Dec 31, 2024 |
(d) Prepare the journal entries on the following dates:
Jan 1, 2022
| Dr. | ||
| Cr. |
Dec 31, 2022
| Dr. | ||
| Dr. | ||
| Cr. |
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