Question

Bramble Corporation, a publicly-traded company, agreed to loan money to another company. On July 1, 2020, the company received a five-year promissory note with a face value of $503,000, paying interest at a face rate of 6% on July 1 each year. The note was issued to yield an effective interest rate of 7%. Bramble used the effective interest method of amortization for discounts or premiums, and the company’s year-end is September 30.

Use 1. PV.1 Tables, 2. a financial calculator, or 3. Excel functions to arrive at the amount to record the note receivable. (Round present value factor calculations to 5 decimal places, e.g. 1.25125 and the final answer to 0 decimal places, e.g. 58,971.)

Note receivable

$

Prepare a schedule of note premium / discount amortization schedule. (Round answers to 0 decimal places, e.g. 58,971.)

Schedule of Note Discount Amortization Effective Interest Method
Date (d-m-yr)	Cash Received	Interest Income	Discount Amortized	Carrying Amount
1-Jul-20				$
1-Jul-21	$	$	$
1-Jul-22
1-Jul-23
1-Jul-24
1-Jul-25
	$	$	$

Prepare the journal entries to record the issue of the note on July 1, 2020, and any required accrual entries at the company’s year-end on September 30, 2020. Finally, prepare the journal entry to record the first cash collection received on July 1, 2021 for Bramble Corporation. (Round answers to 0 decimal places, e.g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit

Answer 1

Calculate the Present value of Note receivable: Amount 503,000 30,180 Particulars Amount of notes receivable (A) Interest payment (B=A6%) Present value of total interest (C=B Present value annuity factor at 7% for 5 years) Present value of Face amount (D=AXPresent value factor at 7% for 5th year) Present value of Note receivable (C+D) 123,744 358,639 482,383 Amortization schedule: Cash received Date (A) 1-Jul-20 1-Jul-21 S 30,180 1-Jul-22 S 30,180 1-Jul-23 S 30,180 1-Jul-24 S 30,180 1-Jul-25 S 30,180 IS 150,900 Interest income Discount Amortized Carrying amount (B)(Carrying valuex7%) (C-B-A) (Carring amount+C) 482,383 S 33.767$ 3,587 S 485,970 34,018 $ 3,838S 489,808 S 34,287 $ 4,107 $ 493,914 S 34.574 S 4,394 S 498,308 $ 34,882 $ 4,702 S 5 03,000 S 171,517| S 2 0,617 617 Journal entries: Credit Date July 1,2020 Debit $503.000 Account title and explanation Notes receivable Discount on notes receivable Cash [To record issuance of note] $20,617 S482,383 I $7.545 $897 Sept 30,2020 Interest receivable (30,180 x 3/12] Discount on notes receivable Interest revenue (33,767 x 3/12) [To record accrued revenue] $8.442 July 1,2021 $30,180 S2.690 Cash Discount on notes receivable Interest receivable Interest revenue (33,767 x 9/12] [To record interest received] $7.545 $25.325