Question

SHOW LIST OF ACCOUNTS LINK TO TEXT Compute the total net liability to be reported on the December 31 balance sheet for (1) The interest-bearing note (2) The zero-interest-bearing note Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS LINK TO TEXT O Type here to search

Answer 1

Answers

• All working forms part of the answer
• Requirement 1

A	Amount of Interest bearing note	$58,600
B	Interest rate	8%
C= A x B	Annual 12 month interest	$4,688
	Period till 31 Dec	1 Oct to 31 Dec
		= 3 months
D = C x 3/12	Interest Payable accrued for 3 months	$1,172
E = A+D	Net Liability to be reported	$59,772 = Answer

• Requirement 2

A	Zero bearing note amount	$63,720
B	Amount borrowed	$58,600
C = A - B	12 month interest = Discount on issuance	$5,120
	Period till 31 Dec	1 Oct to 31 Dec
		= 3 months
D = C x 3/12	Interest payable for 3 months	$1,280
E = C - D	Net Discount	$3,840
F = A - E	Net Liability to be reported	$59,880 = Answer