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On December 31, 2019, AAA Security sold an alarm system to Wondermart in exchange for...

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Accounting

On December 31, 2019, AAA Security sold an alarm system to Wondermart in exchange for a 3-year, $900,000 non-interest-bearing note. Wondermart will make three equal yearly payments to repay the note. AAAs year-end is December 31. Wondermart would normally pay an interest rate of 5%.

Required

  1. Calculate the present value of the note and present a loan amortization table. AAA follows IFRS and therefore uses the effective interest method. Calculate amounts to the nearest dollar. (8 marks)
  2. Prepare all journal entries required for the note for AAA Security, from the initial sale to repayment. (12 marks)

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