Long-Term Liabilities (F5:M3)

Question 1

present value = ___ x ___

Answer 1

future amount x present value factor

Question 2

what does a NP schedule look like?

*effective interest method; annuity

Answer 2

pmt / int / principal reduction / CV

*int = rate x CV

Question 3

when is the effective interest method used?

Answer 3

when a note contains no interest or an unreasonable rate of interest

Question 4

under the effective interest method of NP amortization, what is the journal entry to record interest exp?

Answer 4

interest exp (d)
discount on NP (c)