Answer:
A. $56,000
B. Jan 1, 2020 $70,000
Dec 31, 2020
$27,162 $5,600 -$21,562 $48,438
Dec 31, 2021
$27,162 $3,875 -$23,287 $25,150
Dec 31, 2022
$27,162 $2,012 -$25,150 $0
Total $81,486 $11,487, $70,000
B. Jan 1, 2020
Dr Cash $56,000
Dr Discount on Note Payable $14,000
Cr Note Payable $70,000
Dec 31, 2020
Dr Interest Expense $5,600
Dr Note Payable $21,562
Dr Cash $27,162
Dec 31, 2021
Dr Interest Expense Dr $3,875
Dr Note Payable Dr $23,287
Cr To Cash $27,162
Dec 31, 2022
Dr Interest Expense $2,012
Dr Note Payable $25,150
Cr To Cash $27,162
Step-by-step explanation:
A. Computation for the cash received by the borrower
Cash received by the borrower=70000*8%/10%
Cash received by the borrower=$56,000
Therefore The Cash received by the borrower is $56,000
B.Preparation of a debt amortization schedule.
DEBT AMORTIZATION SCHEDULE
Date Cash Interest Expense Reduction in N.P Carrying Value
Jan 1, 2020 $70,000
Dec 31, 2020
$27,162 $5,600 -$21,562 $48,438
($70,000*8%=$5,600)
($27,162-$5,600=21,562)
($70,000-$21,562=$48,438)
Dec 31, 2021
$27,162 $3,875 -$23,287 $25,150
(8%*$48,438=$3,875)
($27,162-$3,875=$23,287)
($48,438-$23,287=$25,150)
Dec 31, 2022
$27,162 $2,012 -$25,150 $0
(8%*$25,151=$2,012)
($27,162-$2,012=$25,150)
($25,151-$25,150)
Total
Jan 1, 2020 $70,000
Dec 31, 2020
$27,162 $5,600 -$21,562 $48,438
Dec 31, 2021
$27,162 $3,875 -$23,287 $25,150
Dec 31, 2022
$27,162 $2,012 -$25,150 $0
Total $81,486 $11,487, $70,000
b. Preparation of the required entries for the borrower for the issuance of the note on January 1, 2020, and the interest payments in 2020, 2021, and 2022
Jan 1, 2020
Dr Cash $56,000
Dr Discount on Note Payable $14,000
($70,000-$56,000)
Cr Note Payable $70,000
Dec 31, 2020
Dr Interest Expense $5,600
Dr Note Payable $21,562
Dr Cash $27,162
($21,562+$5,600)
Dec 31, 2021
Dr Interest Expense Dr $3,875
Dr Note Payable Dr $23,287
Cr To Cash $27,162
($3,875+$23,287)
Dec 31, 2022
Dr Interest Expense $2,012
Dr Note Payable $25,150
Cr To Cash $27,162
($2,012+$25,150)