On July 1, Year 1, Broadway Financing agrees to loan Choctaw Investment Group money in exchange for a non-interest bearing note with a face value of $800,000, due in four years. The current market interest rate is 11%. Broadway has a fiscal year that ends on December 31.
Required:
1. What are the proceeds of the note?
2. Prepare the journal entry to record the issuance of the note.
3. Prepare the adjusting journal entries for December 31 Year 1 and Year 2.
4. What is the carrying value of the note at the end of Year 2?

Question

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The Answer of On July 1, Year 1, Broadway Financing agrees to loan Choctaw Investment Group money in exchange for a non-interest bearing note with a face value of $800,000, due in four years. The current market interest rate is 11%. Broadway has a fiscal year that ends on December 31.
Required:
1. What are the proceeds of the note?
2. Prepare the journal entry to record the issuance of the note.
3. Prepare the adjusting journal entries for December 31 Year 1 and Year 2.
4. What is the carrying value of the note at the end of Year 2?

On July 1, Year 1, Broadway Financing Agrees to Loan