Problem 1 On January 1, 20x1, an entity obtains an 11%, P5,000,000 bank loan. The bank charges
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Question:
Problem 1
On January 1, 20x1, an entity obtains an 11%, P5,000,000 bank loan. The bank charges the entity an 8.74% nonrefundable loan origination fee. The principal on the loan matures on December 31, 20x4 but interest is due annually every December 31.
Requirements:
- Compute for the initial carrying amount of the loan.
- Compute for the effective interest rate on the loan.
- Compute for the carrying amount of the loan on December 31 20x1.
PROBLEM 2
On January 1, 20x1, an entity issues a 4-year, noninterest bearing, note payable amounting to $4,800,000 in exchange for equipment. The principal on the note is due in three equal annual installments payable every December 31. The effective interest rate on January 1, 20x1 is 14%.
Requirements:
- Compute for current and noncurrent portions of the note payable on December 31, 20x2
- Provide all the entries during the term of the note payable.
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