A	B	C	D	E	F	G	H	I	J	K
6	Accounting for a Notes Payable using the amortized cost measurement model.
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8			Face value (sometimes called 'maturity value') of the note.								INSTRUCTIONS 1) Delete the default data in the yellow-shaded cells and enter your own data. 2) Then click RECALCULATE on the toolbar at the top of the screen to update all values and explanations on this screen. 3) The answers to REQUIRED are presented in the rows below.
9			Number of years from issuance to the note's maturity date.						1 2 3 4 5 6 7 8 9 10
10			Stated rate (sometimes called 'coupon rate' or 'nominal rate').
11			Market rate (sometimes called 'yield', 'required rate of return', 'discount rate', 'effective rate', or 'valuation rate').
12			Amortization method.						Effective interest rate Straight-line
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14			At the beginning of year-1 Tianjin Limited issued a $10,000 note in exchange for professional services it received. The note bears a 6.00% annual rate of interest and will be repaid at the end of year-5. The interest is paid annually on December 31. Tianjin Limited has assessed this note and prevailing interest rates and has decided that it will use 4.00% when valuing the note. Tianjin uses the effective interest rate amortization method. REQUIRED (1) Prepare Tianjin Limited's journal entry to record the issuance of this note payable. (2) Prepare Tianjin Limited's amortization table for this note payable. (3) Prepare Tianjin Limited's journal entries at the end of years 1, 2, and 5.
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16			Part (1): First, calculate the present value of the note payable.
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23			PV of the expected cash outflows on the note
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27			Part (1): Second, prepare the journal entry to record the issuance of the note payable.
28								Debit	Credit
29			Professional Services Expense
31					Notes Payable
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33			Part (2)
34	A	B	C	D	E = $10,000 x 6.00%			H = D - G
35		Year	Amortized cost [unamortized carrying amount] of the note at the BOY**	Unamortized premium on the note payable at the BOY	Credit: Cash account	Debit: Interest Expense account	Debit: Notes Payable account [this equals the annual amortization of the $890.36 premium on the Notes Payable]	Unamortized premium on the note payable at the EOY**	Amortized cost [unamortized carrying amount] of the note at the EOY
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37		2
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39		4
40		5
41		6
42		7
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44		9
45		10
46		TOTALS
47			** BOY = beginning of the year; EOY = end of the year.
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49			Part (3)			Debit	Credit
50			31/12/Year-1
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75	Copyright © Brian Conheady [for educational use]
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