On December 31, 2019, AAA Security sold an alarm system to Wondermart in exchange for...
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Accounting
On December 31, 2019, AAA Security sold an alarm system to Wondermart in exchange for a 3-year, $900,000 non-interest-bearing note. Wondermart will make three equal yearly payments to repay the note. AAAs year-end is December 31. Wondermart would normally pay an interest rate of 5%.
Required
- Calculate the present value of the note and present a loan amortization table. AAA follows IFRS and therefore uses the effective interest method. Calculate amounts to the nearest dollar. (8 marks)
- Prepare all journal entries required for the note for AAA Security, from the initial sale to repayment. (12 marks)
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