On 1 January 20X8, a borrower arranged a $1,040,000 three-year 2% bond payable, with interest paid annually
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Question:
On 1 January 20X8, a borrower arranged a $1,040,000 three-year 2% bond payable, with interest paid annually each
31 December. There was an upfront fee of $111,197, which was deducted from the cash proceeds of the loan on 1 January 20X8. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.)
Required:
1-a. Calculate the effective interest rate associated with the loan. (Round your answer to the nearest whole percentage.)
1-b. What net amount is received on 1 January 20X8?
2. Calculate the interest expense reported by the borrower for each year.
Related Book For
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott
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