On June 1, 2018, a customer made a purchase of $40,000 of merchandise. The customer signed...

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On June 1, 2018, a customer made a purchase of $40,000 ofmerchandise. The customer signed a $40,000, five- year,zero-interest-bearing note due June 1, 2023. The market interestrate for a loan of c omparable risk level was 14%.
Prepare an effective-interest amortization schedule for thepromissory note received from the customer on June 1, 2018. Showcalculations

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4.4 Ratings (816 Votes)

Present value of Note =40000/1/(1+.14)^5 =20774.75

year	Effective Interest	Discount Amortized	Un amortized Discount	Present value of Note
2018			19,225.25	20,774.75
2019	2908.46	2908.46	16316.79	23,683.21
2020	3315.65	3315.65	13001.14	26,998.86
2021	3779.84	3779.84	9221.30	30,778.70
2022	4309.02	4309.02	4912.28	35,087.72
2023	4912.28	4912.28	0.00	40,000.00

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Transcribed Image Text

On June 1, 2018, a customer made a purchase of $40,000 ofmerchandise. The customer signed a $40,000, five- year,zero-interest-bearing note due June 1, 2023. The market interestrate for a loan of c omparable risk level was 14%.Prepare an effective-interest amortization schedule for thepromissory note received from the customer on June 1, 2018. Showcalculations