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Carla VistaIndustries Corp. purchased the following assets and also constructed a building. All this was done during the current year using a variety of financing alternatives.

Assets 1 and 2

These assets were purchased together for $111,000cash. The following information was gathered:

DescriptionInitial Cost on

Seller's BooksDepreciation

to Date on

Seller's BooksBook Value on

Seller's BooksAppraised

ValueMachinery$125,000$57,000$68,000$96,000Equipment68,00010,00058,00032,000

Asset 3

This machine was acquired by making a $9,600down payment and issuing a $30,800, two-year, zero-interest-bearing note. The note is to be paid off in two $15,400instalments made at the end of the first and second years. It was determined that the asset could have been purchased outright for $35,800.

Asset 4

A truck was acquired by trading in an older truck that has the same value in use. The newer truck has options that will make it more comfortable for the driver; however, the company remains in the same economic position after the exchange as before. Facts concerning the trade-in are as follows:

Cost of truck traded$109,000Accumulated depreciation to date of exchange

37,000Fair market value of truck traded83,000Cash paid byCarla Vista9,600Fair market value of truck acquired70,000

Asset 5

Equipment was acquired by issuing170common shares. The shares are actively traded and had a closing market price a few days before the equipment was acquired of $12per share. Alternatively, the equipment could have been purchased for a cash price of $2,015.

Construction of Building

A building was constructed on land that was purchased January 1 at a cost of $148,000. Construction began on February 1 and was completed November 1. The payments to the contractor were as follows:

DatePaymentFeb. 1$127,000June 1360,000Sept. 1486,000Nov. 1107,000

To finance construction of the building, a $609,000,12% construction loan was taken out on February 1. At the beginning of the project,Carla Vistainvested the portion of the construction loan that was not yet expended and earned investment income of $4,600. The loan was repaid on November 1 when the construction was completed. The firm had $200,000of other outstanding debt during the year at a borrowing rate of10% and a $200,000loan payable outstanding at a borrowing rate of6%.

Carla Vistauses a variety of alternatives to finance its acquisitions. Record the acquisition of each of these assets, assuming thatCarla Vistaprepares financial statements in accordance with IFRS. Use the net amount to record the note.

What was the effective interest rate used in negotiating the note payable used to acquire the machinery in Asset 3? Use Excel or a financial calculator to arrive at your answer.(Round final answer to 3 decimal places, e.g. 1.234%.)

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