Homework Answers
Part A to C
| Date | Accounts title | Debit | Credit |
| Sep 1, 2020 | Cash | 4,857,500 | |
| Discount on notes payable (5000000*5.7%*6/12) | 142,500 | ||
| Notes payable | 5,000,000 | ||
| (To record issued zero rate notes.) | |||
| Dec 31, 2020 | Interest expense | 95,000 | |
| Discount on notes payable | 95,000 | ||
| (To record interest expense.) (Sep to Dec = 4) (142500*4/6) | |||
| Feb 28, 2021 | Notes payable | 5,000,000 | |
| Interest expense | 47,500 | ||
| Discount on notes payable (142500*2/6) | 47,500 | ||
| Cash | 5,000,000 | ||
| (To record zero rate notes paid.) |
Part D
| Initial discount | 142,500 |
| Cash received | 4,857,500 |
| Half yearly rate | 2.934% |
| Multiply: number of semiannual period in year | 2 |
| Market rate of return = 5.87% | 5.87% |
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