Question

On May 20, 2020 Beopple Stratified Wall Systems issued at 94.0 at $10,000,000 5 year note payable to Retsoff Equity Advance Partners at a stated rate of 7.5%. BSW incurred bic at 90 bps. The note required calendar-year quarterly payments and was secured by a first mortgag lien on finished goods.

Required: Book the note issuance and the 2Q interest accrual for BSW.

Answer 1

Date	Particulars	Calculation	Debit	Credit
20/05/2020	Bank	Refer above	9,400,000
	Discount on Notes		600,000
	Notes payable			10,000,000
30/06/2020	Interest expense	Refer above	188,000
	Bank			165,000
	Discount on notes			23,000
30/09/2020	Interest expense	Refer above	188,460
	Bank			165,000
	Discount on notes			23,460

	Facts	Calculation
Coupon rate p.a	6.6%	7.5%-0.90% (90 Bps )
Coupon rate quarterly	1.65%	6.6%/4
Tenure	5 years	Given
Yield % (discount rate)	8%	$ 7.50/94
Yield % quarterly	2%	8%/4
Face value USD	100	Given
Interest Income at coupon %	6.60	100* 7.5%
Issue price	9,400,000	10000000/100*94