Barely Oats manufactures organic oatmeal and has been in business for five years. They want to expand their manufacturing facility so on January 1, 2020, Barely issued a $2,200,000, 10-year zero interest-bearing note to First Financial Group. The note was issued to yield 9% annual interest. Fast forward to 2022, and Barely is overextended. First Financial reviews Barely's file on December 31, 2022, and realized Barely will probably pay back 75% of the principal at maturity. The market rate of interest on loans of this nature has increased to 11% at December 31, 2022. First Financial Group uses the effective interest amortization method for their note receivables. 1. How much did Barely Oats receive on January 1, 2020? 2. Compute the loss First Financial will suffer if any?

Barely Oats manufactures organic oatmeal and has been in business for five years. They want to expand their manufacturing facility so on January 1, 2020, Barely issued a $2,200,000, 10-year zero interest-bearing note to First Financial Group. The note was issued to yield 9% annual interest. Fast forward to 2022, and Barely is overextended. First Financial reviews Barely's file on December 31, 2022, and realized Barely will probably pay back 75% of the principal at maturity. The market rate of interest on loans of this nature has increased to 11% at December 31, 2022. First Financial Group uses the effective interest amortization method for their note receivables. 1. How much did Barely Oats receive on January 1, 2020? 2. Compute the loss First Financial will suffer if any?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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