On January 1, 1996, Bondinger Financial Services lent $9,652 to Weyton Industries. In exchange, Bondinger received a note with a maturity date of December 31, 1997, a face value of $10,000, and a stated annual interest rate of 8 percent, to be paid each December 31 through¬ out the life of the note. REQUIRED:

a. Compute the present value of the note’s future cash outflows at discount rates of 8 percent, 10 percent, and 12 percent.

b. What is the effective rate of interest on the note?

c. Using the effective rate of interest calculated in (b), compute the present value of the note’s future cash inflows as of January 1, 1997.

d. Prepare the journal entries for Bondinger Financial Services to record the transactions on January 1, 1996, December 31, 1996, and December 31, 1997.

e. Compute the net book value of the note receivable as of January 1, 1997. Is this amount greater than, equal to, or less than the present value of the note’s future cash inflows cal¬ culated in (c)? Why?