On August 1, 2010, Christy Co. treasurer signed a note promising to pay \$121,500 on December 31, 2010. The proceeds of the note were \$114,000. rev: 05-10-2011 19.value: 15.00 points You

On August 1, 2010, Christy Co. treasurer signed a note promising to pay \$121,500 on December 31, 2010. The proceeds of the note were \$114,000.

rev: 05-10-2011

19.value:

15.00 points

You did NOT receive full credit for this question in previous attempt.

Requirement 1:

Calculate the discount rate used by the lender. (Round your answer to 1 decimal place. Omit the “%” sign in your response.)

Discount rate %

rev: 05-10-2011

20.value:

15.00 points

You did NOT receive full credit for this question in previous attempt.

Requirement 2:

Calculate the effective interest rate (APR) on the loan. (Round your answer to 1 decimal place.Omit the “%” sign in your response.)

Effective interest rate %

rev: 05-10-2011

21.value:

15.00 points

You did NOT receive full credit for this question in previous attempt.

Requirement 3:

(a)

Prepare the horizontal model to show the effects of signing the note and the receipt of the cash proceeds on August 1, 2010. (+ for increase, – for decrease and NE for no effect).

Balance Sheet Income Statement

Assets = Liabilities + Owners’ Equity ← Net income = Revenues – Expenses

(b)

Prepare the horizontal model to show the effects of recording interest expense for the month of September. (+ for increase, – for decrease and NE for no effect).

Balance Sheet Income Statement

Assets = Liabilities + Owners’ Equity ← Net income = Revenues – Expenses

(c)

Prepare the horizontal model to show the effects of repaying the note on December 31, 2010. (+ for increase, – for decrease and NE for no effect).

Balance Sheet Income Statement

Assets = Liabilities + Owners’ Equity ← Net income = Revenues – Expenses

rev: 11_17_2011

22.value:

15.00 points

You did NOT receive full credit for this question in previous attempt.

Requirement 3:

(d)

Record the journal entry to show the effects of signing the note and the receipt of the cash proceeds on August 1, 2010. (Omit the “\$” sign in your response.)

Date General Journal Debit Credit

August 1,2010

(e)

Record the journal entry to show the effects of recording interest expense for the month of September. (Omit the “\$” sign in your response.)

Date General Journal Debit Credit

September 30, 2010

(f)

Record the journal entry to show the effects of repaying the note on December 31, 2010. (Omit the “\$” sign in your response.)

Date General Journal Debit Credit

December 31, 2010