Problem 1 On January 1, 20X1, Flo Corporation borrowed $20,000 on a two-year interest-bearing note from US Bank at an annual interest rate of 10 percent (Note A). Also on January 1, 20X1, Flo borrowed $25,000 from First Bank, signing a three-year interest-bearing note at an annual interest rate of 12 percent (Note B). For both notes, interest is payable yearly on January 1.

1. Prove that $20,000 is the present value of Note A
2. Prepare the entry to record Note A
3. Prepare the entry to record Note B
4. Prepare the adjusting entry to accrue interest on the notes on December 31, 20X1
5. Prepare the entry to record the interest payment on the notes on January 1, 20X2
6. Prepare the entry to record the payment of Note B on January 1, 20X4