Question

Assume that Cardinal Corporation provides services to Sparrow Co. and receives in exchange a three-year $25,000 note bearing interest at 10% annually. The market rate of interest for a note of similar risks 12%. A schedule of the note amortization is as follows: Cardinal Corporation Schedule of Note Discount Amortization Discount Amortized Cash Effective Date Interest interest Date of issue End of year 1 $2,500.00 $ 2,855.00 End of year 2 2,500.00 2,897.50 End of year 3 TOTALS Carrying Value $23,800.00 24,155.00 $335.00 397.50 Complete the last line of the amortization schedule What is the total discount on this note? What is the total amount of interest Morgan will earn on this note? What is the total cash collect over the life of this note? What is the carrying value of the note at the end of the 2nd year? Prepare the journal entry to record issuance of the note. Prepare the journal entry to record first annual interest payment. Prepare the journal entry to record collection of the note and interest at the end of the 3rd year
please give explanations

Answer 1

Cash Interest Essuive 905 ويلقنون ANSWER Dath Issue year Year2 Year 3 2sco asoo 2sco 2855 2897.so 2967.50 [2500 1.so $8720 Discount Amost $23,800 335.00 $ 24,iss 397.50 $ 24552.SO 467.50 $20000 [241SS (+)3975 $1200 [25c60-23800] $ 7 Soo Total discount → $1200 Total Interest Ealined $8720 Total Cash Collected - $32,500 [7500(H) 25000] Caveying vale @ End of year 2 7 $24552.50 Sssveance Cash Discount on Band Bord Payalee Dr Dr ce $23800 $ 1200 $25000 ist Payment Interest Expense Dis cout Dr ce ce $2855 S 335 $ 2500 maturity Cash Deu cel Bonds. зочид $ 27 Soo $ 2 Sood с 2 soo ч ол