Reference no: EM133069066
Question - Amortization of discount on note - On December 31, 2016, Green Company finished consultation services and accepted in exchange a promissory note with a face value of $800,000, a due date of December 31, 2019, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%.
Required -
1. Determine the present value of the note.
2. Prepare the journal entry on December 31, 2016.
3. Prepare the journal entry to record interest on December 31, 2017 (at the effective rate).
4. Prepare the journal entry to record interest on December 31, 2018 (at the effective rate).
5. Prepare the journal entry to record interest on December 31, 2019 (at the effective rate).
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