On March 1, 2020 Giant Jumbo Clown Costumes borrowed money from Second Friendly National Bank by issuing a $125,000, 180-day, non-interest bearing note. The note was discounted on a 13.5% basis. Assume 360 days in a year. Required: Compute the following:1.How much money did Giant Jumbo receive?2.What was the total amount of interest paid?3.What is the effective 180-day interest rate on this note payable?4.What is the approximate annual effective interest rate on this note payable?5.Record the journal entry(ies)for the issuance of the note.

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Answered: On March 1, 2020 Giant Jumbo Clown…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 4P: Gifts Galore Inc. borrowed 1.5 million from National City Bank. The loan was made at a simple annual...

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On March 1, 2020 Giant Jumbo Clown Costumes borrowed money from Second Friendly National Bank by issuing a $125,000, 180-day, non-interest bearing note. The note was discounted on a 13.5% basis. Assume 360 days in a year.

	Required:
	Compute the following:
1.	How much money did Giant Jumbo receive?
2.	What was the total amount of interest paid?
3.	What is the effective 180-day interest rate on this note payable?
4.	What is the approximate annual effective interest rate on this note payable?
5.	Record the journal entry(ies)for the issuance of the note.