On November 1, 2016, Edwin Inc. borrowed cash and signed a $60,000, 1-year note payable.

Required:

1.

Compute the following items assuming (a) an interest-bearing note at 12%, (b) a non-interest-bearing note discounted at 12%:

A.	cash received
B.	effective interest rate
C.	interest expense for 2016

2.

Prepare the journal entries for Edwin under each case for 2016 and 2017.

3.

Next Level Why is the effective rate higher for the non-interest-bearing note?

Assuming an interest-bearing note at 12%, prepare the necessary journal entries to record:

	1. the note payable on November 1, 2016
	2. the year-end adjustment related to the note
	3. the payment of the note, including both principal and interest, on October 31, 2017
	Additional Instructions

Assuming a non-interest-bearing note at 12%, prepare the necessary journal entries to record:

	1. the note payable on November 1, 2016
	2. the year-end adjustment related to the note
	3. the interest expense on October 31, 2017
	4. the payment of the note on October 31, 2017
	Additional Instructions

Compute the cash received assuming (A) an interest-bearing note at 12% and (B) a non-interest-bearing note discounted at 12%.

A.	The cash received for the interest-bearing note is .
B.	The cash received for the discounted non-interest-bearing note is .

Compute the effective interest rate assuming (A) an interest-bearing note at 12% and (B) a non-interest-bearing note discounted at 12%.

A.	The effective interest rate for the interest-bearing note is .
B.	The effective interest rate for the discounted non-interest-bearing note (rounded to two decimal places) is .

Compute the 2016 interest expense assuming (A) an interest-bearing note at 12% and (B) a non-interest-bearing note discounted at 12%.

A.	The 2016 interest expense for the interest-bearing note is .
B.	The 2016 interest expense for the discounted non-interest-bearing note is .