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42) Explain what happens to assets and to liabilities when a borrower issues a note payable for the purchase of equipment?

43) Why is the effective rate of interest always higher than the interest rate of the loan on a discounted note?

44) How would you compute the accrued interest expense on December 31 for a $5,000 note payable for 75 days at 8% interest dated November 25?

45) Chase Hunford negotiated a $50,000 bank loan for 210 days at a bank rate of 12%. The bank deducted the interest in advance.

Required (show your calculations):

a) Calculate the amount of interest charged by the bank.

b) Calculate the amount of cash Chase received from the bank.

c) Calculate the effective interest rate charged by the bank.

d) Prepare Chase’s journal entry for the transaction.



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