Jeremiah Company receives a three-year, $10,000, zero-interest-bearing note, and the related present value with a market interest rate of 9% is $7,721.80. The total discount of $2,278.20 under the straight-line method is amortized over the three-year period in equal amounts each year. Therefore, the annual amortization is $2,278.20÷3 or $759.40. Schedule of Note Discount Amortization Effective Interest Method 0% Note Discounted at 9% Cash Received Interest Income Discount Amortized Carrying Amount of Note Date of issue $7,721.80 End of Year 1 $0 $694.96 $694.96 8,416.76 End of Year 2 0 757.51 757.51 9,174.27 End of Year 3 825.73 825.73 10,000 $0 $2,278.20 $2,278.20 Click here to view factor tables Prepare the entry to record the annual interest for years 1 and 2 under the straight-line method and the effective interest method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as
Jeremiah Company receives a three-year, $10,000, zero-interest-bearing note, and the related present value with a market interest rate of 9% is $7,721.80. The total discount of $2,278.20 under the straight-line method is amortized over the three-year period in equal amounts each year. Therefore, the annual amortization is $2,278.20÷3 or $759.40. Schedule of Note Discount Amortization Effective Interest Method 0% Note Discounted at 9% Cash Received Interest Income Discount Amortized Carrying Amount of Note Date of issue $7,721.80 End of Year 1 $0 $694.96 $694.96 8,416.76 End of Year 2 0 757.51 757.51 9,174.27 End of Year 3 825.73 825.73 10,000 $0 $2,278.20 $2,278.20 Click here to view factor tables Prepare the entry to record the annual interest for years 1 and 2 under the straight-line method and the effective interest method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Jeremiah Company receives a three-year, $10,000, zero-interest-bearing note, and the related present value with a market interest
rate of 9% is $7,721.80. The total discount of $2,278.20 under the straight-line method is amortized over the three-year period in
equal amounts each year. Therefore, the annual amortization is $2,278.20÷3 or $759.40.
Schedule of Note Discount Amortization
Effective Interest Method
0% Note Discounted at 9%
Cash Received
Interest Income
Discount Amortized
Carrying Amount of Note
Date of issue
$7,721.80
End of Year 1
$0
$694.96
$694.96
8,416.76
End of Year 2
0
757.51
757.51
9,174.27
End of Year 3
825.73
825.73
10,000
$0
$2,278.20
$2,278.20
Click here to view factor tables
Prepare the entry to record the annual interest for years 1 and 2 under the straight-line method and the effective interest method.
(Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"
for the account titles and enter O for the amounts. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as
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