Compute the actual annual interest rate on the note

Assignment Help Finance Basics

Reference no: EM131410688

On December 1, Spencer Department Store borrowed $19,250 from First Bank and Trust. Spencer signed a ninety-day note with a face amount of $20,000. The interest rate stated on the face of the note is 15 percent per year.

a. Provide the journal entry recorded by Spencer on December 1.

b. Provide the adjusting entry recorded by Spencer on December 31 before financial statements are prepared. Show how the note payable would be disclosed on the December 31 balance sheet.

c. Compute the actual annual interest rate on the note. (Hint: Note that Spencer had the use of $19,250 only over the period of the loan.)

d. Why is the actual interest rate different from the rate stated on the face of the note?

Reference no: EM131410688

Questions Cloud

Conduct research and deliver findings : Conduct research and deliver findings in professional settings.No matter how extensive the research or accurate the conclusions, a weak presentation can undermine an argument.

How do you find the right balance : On the other hand, being too optimistic could be detrimental to prospective investors or creditors. How do you find the right balance?

What is amnesty international and why is it so important : Pick one of the signs that you may see that lets you know that the end of the helping relationship is near and discuss how this sign may present itself. - (Client recognize problem has decreased or is gone) What is Amnesty International and why is ..

How much mass have they put on at the end of the year : Sitting has a metabolic rate of 50 Cal/hr m2. Assume that each beer was Sierra Nevada Pale Ale, 175 Cal per beer, their surface area is a constant 1.7 m2, and that the added weight would be fat. This fat has no water content. How much mass have th..

Compute the actual annual interest rate on the note : On December 1, Spencer Department Store borrowed $19,250 from First Bank and Trust. Spencer signed a ninety-day note with a face amount of $20,000. The interest rate stated on the face of the note is 15 percent per year.

How often would the cycle turn over in a year : Estimate the average length of the firm's short-term operating cycle. How often would the cycle turn over in a year? What would be the net financing need considering only these three accounts?

Discuss the significant aspect of the graying of america : Research tells us that many families provide care for aging adults within their own homes due to the very high cost of placing older adults in institutions. 76% of all informal primary caregivers for older adults are women. In fact, data indicate ..

What should you do and why in given context : Your cofounders say they are too busy chasing great opportunities right now, and they want to wait until right before the IPO to hire a seasoned financial executive to put things in order. What should you do and why?

Compute the company’s current ratio : Compute the company's current ratio if it invests $50,000 of the borrowed funds in fixed assets and keeps the rest as cash or short-term investments. To what dollar amount can current liabilities grow before the company violates the debt contract?

User Account

All Pages