2. On June 30, 2018, Rodopoulos Marketing Group borrowed cash from its bank and

Question

2. On June 30, 2018, Rodopoulos Marketing Group borrowed cash from its bank and signed a six-year note. Under the terms of the note Rodopoulos must make 72 equal monthly payments of principal and interest at the end of each month. The first payment was due on July 31, 2018. Rodopoulos Marketing Group made all of the required payments during 2018. Presented on the following page is an amortization table for the first 36 payments due on the loan Use the schedule to answer the following questions. Indicate the items and their amounts that Penny Novelties should have reported relative to the loan in its 2018 GAAP financial statements. (Ignore cash.) (6 points) Statement for the year ended December 31, 2018: Amount Interest Expense tement of Financial Position at December 31, 2018: Amount Current Liabilities: Current Portion of Long-Term Debt Long-term Liabilities: Long-Term Debt SUPPORTING CALCULATION REQUIRED for both the Income statement and balance sheet amounts. You may present those calculations by identifying the amounts used in the amortization schedule on the following page

Explanation / Answer

Solution :

Interest expense for Dec 31, 2018 = $3,750 + $3,711 + $3,671 + $3,631 + $3,590 + $3,550 = $21,903

Total Principal outstanding on Dec 31, 2018 = $467,826

Principal outstanding on Dec 31, 2019 = $398,984

Current portion of long term debt = $467,826 - $398,984 = $68,842

Long term debt =$398,984

Income statement for the year ended December 31, 2018 Particulars Amount Interest Expense $21,903.00

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