Question
In: Accounting
On June 1, 2018, a customer made a purchase of $40,000 of merchandise. The customer signed...
On June 1, 2018, a customer made a purchase of $40,000 of merchandise. The customer signed a $40,000, five- year, zero-interest-bearing note due June 1, 2023. The market interest rate for a loan of c omparable risk level was 14%.
Prepare an effective-interest amortization schedule for the promissory note received from the customer on June 1, 2018. Show calculations
Solutions
Expert Solution
Present value of Note =40000/1/(1+.14)^5 =20774.75
| year | Effective Interest | Discount Amortized | Un amortized Discount | Present value of Note |
| 2018 | 19,225.25 | 20,774.75 | ||
| 2019 | 2908.46 | 2908.46 | 16316.79 | 23,683.21 |
| 2020 | 3315.65 | 3315.65 | 13001.14 | 26,998.86 |
| 2021 | 3779.84 | 3779.84 | 9221.30 | 30,778.70 |
| 2022 | 4309.02 | 4309.02 | 4912.28 | 35,087.72 |
| 2023 | 4912.28 | 4912.28 | 0.00 | 40,000.00 |
ekkarill92 answered 7 months agoRelated Solutions
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