Using Excel to Account for Notes Payable

PROBLEM

Snade Corporation issued a five$-$year note to Hames Corp. on January $1,2020,$

and received a piece of equipment. The note requires annual interest

payments each December $31.$ Information concerning the note follows.

Face value of note

Stated interest rate

Note term in years

Value of equipment received

Market interest rate of similar notes

$$50,000$

$5\%$

$5$

$ $38,912$

$11\%$

Student Work Area

Required: Provide input into cells shaded in yellow in this template. Use Excel's RATE

function with cell references to the Problem and work areas to calculate the implicit

rate of the note. Use mathematical formulas with cell references to the Problem area

and work area as indicated for other amounts.

$($a$)$ Using Excel's Rate function, calculate the implicit interest rate.

Annual interest payments

Implicit interest rate

$($b$)$ Prepare Snade's journal entry for the January $1,2020$ issuance.

$($c$)$ Prepare the entry for the December $31,2020$ interest payment using the

effective interest method.