Business, 14.12.2021 14:00 boogerbuttday
On 1 January 2020, GSS Limited purchased a three-year interest-bearing note issued by a financial institution, with a face value of $100,000, due on 1 January 2023. This note bears an annual interest at 5% payable on each 1 January, starting from 1 January 2021. The market rate of interest for a note of similar risk is 8%. Cash equal to the present value of this note was paid by GSS on the purchase date.
GSS has a financial year ended 31 December.
Required:
(a) Calculate the present value of the note on 1 January 2020.
(b) Prepare all the journal entries for year 2020 and for 2021 respectively.
Answers: 3
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