Problem related to effective interest rate

Assignment Help Accounting Basics

Reference no: EM13127446

Mondovi Winery borrowed $20 million cash on December 1, 2011, to provide working capital for year-end inventory. Mondovi Winery issued a 4-month, 9% promissory note to Silicon Valley Bank under a prearranged short-term line of credit. Interest on the note was payable at maturity. Each firm's fiscal period is the calendar year.

Required:

1. Prepare the journal entries to record (a) the issuance of the note by Mondovi Winery and (b) Silicon Valley receivable on December 1, 2011.

2. Prepare the journal entries by both firms to record all subsequent events related to the note through March 31, 2012.

3. Suppose the face amount of the note was adjusted to include interest (a noninterest-bearing note) and 9% is the bank's stated "discount rate." Prepare the journal entries to record the issuance of the noninterest-bearing note by Mondovi Winery on December 1, 2011. What would be the effective interest rate?

Reference no: EM13127446

Questions Cloud

Taxpayer sells depreciable business property : A business taxpayer sells depreciable business property with an adjusted basis of $400,000 for $32,000. The taxpayer held the property for more than a year. The taxpayer has an $8000 long term capital loss.

Decision analysis question : Consider the following Pay-off Table: Decision Alternatives Shortage Stable Supply Surplus

What is the minimum amount of robin salary : Robin is working overseas on a temporary assignment beginning on March 1 of this year through January 31 of next year. Her salary is $10,000 per month while overseas, but only $8,000 per month for January and February of this year.

Portfolios for writing : Portfolios for Writing

Problem related to effective interest rate : Prepare the journal entries to record the issuance of the noninterest-bearing note by Mondovi Winery on December 1, 2011. What would be the effective interest rate?

Distinguish between job costing and process costing : Distinguish between job costing and process costing. Describe the difficulties associated with each type. What can companies do in order to price products competitively and avoid some of these difficulties?

How many total iron atoms and oxygen molecules combine : Four atoms of iron (Fe) are to be combined with three molecules of oxygen (O2). How many total iron atoms and oxygen molecules will be combined during the formation of Fe3O4?

Decision analysis-lead time : Using the optimistic and conservative approaches in a decision analysis will never give the same optimal decision is the question true or false?

Calculate the concentrations of all species at equilibrium : Calculate the concentrations of all species at equilibrium for the following case.

User Account

All Pages