#1 - Accounting for a long-term note payable Learning Objective 1 On January 1, 2018, Lakeman-Fay signed a $1,500,000, 15-year, 7% note. The loan required Lakeman-Fay to make annual payments on December 31 of $100,000 principal plus interest. Requirements 1. Journalize the issuance of the note on January 1, 2018. 2. Journalize the first note payment on December 31, 2018. 3. How much principal does Lakeman-Fay owe after the first annual payment on December 31, 2018? #2 - Determining bond prices Learning Objective 2 Bond prices depend on the market rate of interest, stated rate of interest, and time. Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount: a. The market interest rate is 4%. Denton issues bonds payabiy with a stated rate of 4%. b. Starkville issued 8% bonds payable when the market intercke rate was 8.25%. c. Houston issued 6% bonds when the market interest rate was 5%. d. Federal issued bonds payable that pay the stated interest rate of 5.5%. At issuance, the market interest rate was 7.75%. Requirements 1. Journalize the issuance of the note on January 1, 2018. Date Account Name Debit Credit $1,500,000 Jan 1 2018 Cash 7% Notes Payable (to record the issue of note) $1,500,000 Credit 2. Journalize the first note payment on December 31, 2018. Date Account Name Debit Dec 31 2018 Interest Expense $105,000 7% Notes Payable (to record annual interest expense) $105,000 $205,000 Dec 31 2018 7% Notes Payable Cash (to record payment of portion of note) $205,000