On October 1, 2017, Ratkowski Inc. borrowed $18,000 from Second National Bank by issuing a 12-month note.

Question:

On October 1, 2017, Ratkowski Inc. borrowed $18,000 from Second National Bank by issuing a 12-month note. The bank discounted the note at 9%.

Required

1. Identify and analyze the effect of the issuance of the note.

2. Identify and analyze the effect of the accrual of interest on December 31, 2017.

3. Identify and analyze the effect of the payment of the note on October 1, 2018.

4. What effective rate of interest did Ratkowski pay?

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