Chapter 14, Problem 14.3P

Note Payable Issued at a Discount with Amortization Table. On September 30, 2018, Laurino Landscaping Company issued a 6-year 3% $800,000 note payable. The note was issued on a date when the market rate was 5%. Interest at 3% is due annually every September 30, beginning September 30, 2019. The full amount of the principal amount is due and payable at maturity. The company’s fiscal year ends on December 31.

Required

1. a. Determine the present value of the note and the discount on the note payable.
2. b. Prepare the journal entry to record the issuance of the note payable.
3. c. Prepare an amortization table.
4. d. Prepare the journal entry to record an accrued interest expense on December 31, 2018.
5. e. Prepare the journal entry required on September 30, 2019.
6. f. Prepare the journal entries required at maturity.