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The face value of commercial paper borrowings at December 31, 2020, was $5 million. The six-month loan originated on Septembe

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Answer #1

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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