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First, find the present value of the note.
We use the present value of a lump sum
PV = FV/(1+r)^t
where R is the market rate of interest (11%), T is the number of years (3), and FV is the future value of the note (50,000)
Plus the present value of an ordinary annuity (the 9% of 50,000 annually represents an annuity, which we will use for the PMT):
PV = PMT x (1- [1 / (1+r)^t] / r )
That will tell us how much of a premium or discount to record (in this case it should be a discount) by subtracting the total of the two formulas from 50,000.
The journal entry should look like this for the company making the loan:
Notes Receivable
---Discount on Notes Receivable
---Cash
Then, every year, we amortize that by finding 11% of the carrying value of the note (Total PV we calculated x the market rate of interest). Whatever cash we pay (9% of 50,000) is subtracted from it as our interest component of that number. The remainder is amortized.
The journal entry should look a lot like this:
Cash
Discount on Notes Receivable
---Interest Revenue
---Notes Receivable
What else can I help you with?
How many times interest be added to the principal in one year if the interest is compounded annually?
"Compounded annually" means that the interest is added once a year.
What is the simple interest paid annually for 5 years on a 700 loan at 11 percent per year?
The interest paid annually is 700*5/100 = 35
How do you converts interest rate from compounding quarterly to compound annually?
Interest of r% per quarter is equivalent to {(1+r/100)4 - 1} percent annually.
Does Interest Compounded semi-annually double every year?
No.
How much interest will be earned on 1250 at a 5 percent interest annually?
5% ($72.50) per year.
Is the interest rate calculated annually or monthly?
The interest rate is calculated annually.
How many times interest be added to the principal in one year if the interest is compounded annually?
"Compounded annually" means that the interest is added once a year.
What is the simple interest paid annually for 5 years on a 700 loan at 11 percent per year?
The interest paid annually is 700*5/100 = 35
How do you converts interest rate from compounding quarterly to compound annually?
Interest of r% per quarter is equivalent to {(1+r/100)4 - 1} percent annually.
Does Interest Compounded semi-annually double every year?
No.
How much interest will be earned on 1250 at a 5 percent interest annually?
5% ($72.50) per year.
How many times will interest be added to the principal in 1 year if the interest rate is compounded annually?
Once.
How many times interest be added to the principal in one year if the interest is compounded semi-annually?
twoo '
How many times interest be added to the principal in one year if the interest is compounded semi annually?
Twice
When is the interest paid on Business Time Deposit Accounts?
The frequency with which you choose to receive your interest payment depends on the term of your Business Time Deposit Account. For terms of seven through 31 days, interest may be paid only at maturity. For terms of 32 days to one year, interest may be paid monthly, quarterly, semi-annually, annually, or at maturity. For terms greater than one year, interest must be paid at least annually and may be paid monthly, quarterly, or semi-annually.
What type of interest is on a specific time frame?
The definition of periodic interest rate is an interest rate figured over a specific time frame. Compound interest is also figured on a specific time frame. For instance, some interest is compounded quarterly, some is compounded annually or semi-annually, or even monthly.
What type of interest is figured on a specific time frame?
The definition of periodic interest rate is an interest rate figured over a specific time frame. Compound interest is also figured on a specific time frame. For instance, some interest is compounded quarterly, some is compounded annually or semi-annually, or even monthly.
