On September 30, Yang Company signed a HK$150,000, one-year zero-interest-bearing note at First Solvent Bank.Yang's borrowing rate on such obligations is 12% (.89286 present value factor).The September 30 journal entry to record issuance of the note would include:

Question

Quizplus · Accepted Answer

The note is a zero-interest-bearing note, so it is recorded at its present value. The present value of the note is HK$150,000 * 0.89286 = HK$133,929. Therefore, the credit to Notes Payable would be HK$133,929.

On September 30, Yang Company Signed a HK$150,000, One-Year Zero-Interest-Bearing