Issues a $ 250,000, Three-Month Zero-Interest-Bearing Note Payable to Hanson

question 30

Essay

issues a $ 250,000, three-month zero-interest-bearing note payable to Hanson Bank on May 1, 2020. The note has a present value of $ 246,305 based on the bank's discount rate of 6%.
Instructions
Prepare the journal entry to record the cash received by Mishin on May 1, the entry to record interest expense at the company's July 31 year-end and the entry at maturity of the note.

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Definitions:

Foreign Exchange Gain

Profit from favourable changes in exchange rates affecting the value of currency positions.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time, often reported on the income statement.

Relevant Exchange Rates

The appropriate exchange rates used in the conversion of foreign currency transactions into the functional currency for reporting purposes.

Fixed Interest Rate

An interest rate on a liability, such as a loan or mortgage, that remains constant for either an agreed period of time or the entire term of the loan.