Answer:
The carrying value of the note payable on 12/31/2021 is $95,260
Explanation:
First, we need to calculate the present value of note
Present value of note = Face value / ( 1 + Interest rate )^numbers of years
Where
Face value = $120,000
Interest rate = 8%
Numbers of years = 5 years
Placing vlaues in the formula
Present value of note = $120,000 / ( 1 + 8% )^5
Present value of note = $81,669.98
Present value of note = $81,670
12/31/2020
Interst expense = Present value at issuance x Interest rate = $81,670 x 8% = $6,533.60
Carrying Value = Present value at issuance + Interest for 2020 = $81,670 + $6,533.60 = $88,203.60
12/31/2021
Interst expense = Present value at issuance x Interest rate = $88,203.60 x 8% = $7,056.29
Carrying Value = Present value at issuance + Interest for 2021 = $88,203.60 + $7,056.29 = $95,259.89 = $95,260
Hence, the carrying value of the note payable on 12/31/2021 is $95,260
