Materials Ltd. purchases inventory on 1 April 20X7 and agrees to pay the vendor $126,000 on 31 March 20X9, plus annual interest at 2% each 31 March. The market interest rate for similar term and security is 7%. Assume also that the inventory does not have a readily determinable market value. 

Required:

1. Calculate the present value of the note payable. 

2. Prepare a table that shows the balance of the note payable and interest expense over the life of the note.

Transcribed Image Text:

Interest Expense Interest Paid Market Rate Closing Net Liability Discount Opening Net Liability Amortization Year 1 Interest Expense Interest Paid Market Rate Closing Net Liability Discount Opening Net Liability Amortization Year 1

Answer rating: 100% (QA)

Solution Principal 126000 Interest rate 2 market rate 7 ... View the full answer