Question
In: Accounting
Stickleback performed services for a customer in exchange for a $18,000, 5 year, 10% note receivable...
Stickleback performed services for a customer in exchange for a $18,000, 5 year, 10% note receivable on January 1, 2020. Interest will be paid quarterly, with the first payment at the end of the first quarter. The customer’s normal borrowing rate is 12%.
Determine the balance in the discount on note receivable as of December 31, 2023.
|
$2,007 |
||
|
$334 |
||
|
None of the other answer choices is correct. |
||
|
$632 |
||
|
$1,130 |
||
|
$5,194 |
||
|
$17,665 |
Solutions
Expert Solution
PV Factor @2.5% for 20 periods = 0.5537
PV Annuity @3% for 20 periods = 14.8775
Carrying Value of Bonds on Jan 1, 2020 = $18000 x 0.5537 +
$18000 x 10% x 3/12 x 14.8775 = $16661
Discount on Bonds = $18000-16661 = $1339
| Periods | Payment | Interest | Discount Amortized | Carrying Value |
| 0 | $ 16,661 | |||
| 1 | $ 450 | $ 500 | $ 50 | $ 16,711 |
| 2 | $ 450 | $ 501 | $ 51 | $ 16,762 |
| 3 | $ 450 | $ 503 | $ 53 | $ 16,815 |
| 4 | $ 450 | $ 504 | $ 54 | $ 16,869 |
| 5 | $ 450 | $ 506 | $ 56 | $ 16,926 |
| 6 | $ 450 | $ 508 | $ 58 | $ 16,983 |
| 7 | $ 450 | $ 509 | $ 59 | $ 17,043 |
| 8 | $ 450 | $ 511 | $ 61 | $ 17,104 |
| 9 | $ 450 | $ 513 | $ 63 | $ 17,167 |
| 10 | $ 450 | $ 515 | $ 65 | $ 17,232 |
| 11 | $ 450 | $ 517 | $ 67 | $ 17,299 |
| 12 | $ 450 | $ 519 | $ 69 | $ 17,368 |
| 13 | $ 450 | $ 521 | $ 71 | $ 17,439 |
| 14 | $ 450 | $ 523 | $ 73 | $ 17,512 |
| 15 | $ 450 | $ 525 | $ 75 | $ 17,588 |
| 16 | $ 450 | $ 528 | $ 78 | $ 17,665 |
Discount on note as of Dec 31, 2023 = $18000 - 17665 = $335
Answer is b. $334
ekkarill92 answered 2 years agoRelated Solutions
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