On September 1, 2017, Ensign Inc. borrowed $21,000 from Emerald City National Bank by issuing a 12-month note. The bank discounted the note at 7.5%.

Required
1. Analyze the impact of the journal entry needed to record the issuance of the note.
2. Analyze the impact of the journal entry needed at December 31, 2017, to accrue interest.
3. Analyze the impact of the journal entry to record the payment of the note on September 1, 2018.
4. What effective rate of interest did Ensign pay?

Question

On September 1, 2017, Ensign Inc. borrowed $21,000 from Emerald City National Bank by issuing a 12-month note. The bank discounted the note at 7.5%.

Required
1. Analyze the impact of the journal entry needed to record the issuance of the note.
2. Analyze the impact of the journal entry needed at December 31, 2017, to accrue interest.
3. Analyze the impact of the journal entry to record the payment of the note on September 1, 2018.
4. What effective rate of interest did Ensign pay?

Quizplus · Accepted Answer

The Answer of On September 1, 2017, Ensign Inc. borrowed $21,000 from Emerald City National Bank by issuing a 12-month note. The bank discounted the note at 7.5%.

Required
1. Analyze the impact of the journal entry needed to record the issuance of the note.
2. Analyze the impact of the journal entry needed at December 31, 2017, to accrue interest.
3. Analyze the impact of the journal entry to record the payment of the note on September 1, 2018.
4. What effective rate of interest did Ensign pay?