Record Note Receivable on January 1, 2020, Jumpstart Corp

question 114

Essay

Record note receivable On January 1, 2020, Jumpstart Corp. makes a loan to TryStar Company and receives a $100,000, five-year note bearing interest at 4% semi-annually The market rate for similar loans (with similar credit risk) is 6%.
Instructions
A) Calculate the present value (fair value) of this loan (round to the nearest dollar).
B) Prepare the journal entry to record this transaction.

• A) Calculate the present value (fair value) of this loan (round to the nearest dollar).
• B) Prepare the journal entry to record this transaction.

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Definitions:

Current

In finance, "current" typically refers to assets and liabilities that are expected to be realized or settled within one year from the reporting date.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time.

Net Income

The amount of earnings remaining after all expenses and taxes have been subtracted from total revenue.

Return Ratio

Financial metrics used to evaluate the efficiency or profitability of an investment relative to its cost.