On January 1, 2016, Bryson Company obtained a $147,750, four-year, 7% installmen

Question

On January 1, 2016, Bryson Company obtained a $147,750, four-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31, 2016. Required: A. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4. B. Journalize the entries for the issuance of the note and the four annual note payments. Be sure to include the year in the date for the entries. Refer to the Chart of Accounts for exact wording of account titles. C. Describe how the annual note payment would be reported in the 2016 income statement. Chart of Accounts CHART OF ACCOUNTS Bryson Company General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Merchandise Inventory 141 Office Supplies 142 Store Supplies 151 Prepaid Insurance 191 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary REVENUE 410 Sales 610 Interest Revenue 611 Gain on Redemption of Bonds EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 521 Sales Salaries Expense 522 Office Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 534 Selling Expenses 535 Rent Expense 536 Insurance Expense 537 Office Supplies Expense 538 Store Supplies Expense 541 Bad Debt Expense 561 Depreciation Expense-Store Equipment 562 Depreciation Expense-Office Equipment 590 Miscellaneous Expense 710 Interest Expense 711 Loss on Redemption of Bonds Amortization table A. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4. Round amounts to the nearest dollar. Amortization of Installment Notes A B C D E For the Year Ending January 1 Carrying Amount Note Payment Interest Expense Decrease in Notes Payable Dec. 31 Carrying Amount Dec. 31, 2016 $ $ $ $ $ Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2019 $ $ $ Journal B. Journalize the entries for the issuance of the note and the four annual note payments. Be sure to include the year in the date for the entries. Refer to the Chart of Accounts for exact wording of account titles. PAGE 10 JOURNAL DATE DESCRIPTION POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Final Question c. Describe how the annual note payment would be reported in the 2016 income statement. Interest expense of $ would be reported on the income statement.

Explanation / Answer

Ans a Amortization Table Year 1 Year 2 Year 3 Year 4 Opening Balance   A 147750 114473 78866 40766 Interest 7% B 10342.5 8013 5521 2854 Fixed Installment   C 43620.0 43620 43620 43620 Closing Balance A+B-C 114472.5 78866 40766 0 Principal C-B 33277.5 35607 38099 40766 Date Accounts Title Dr Cr 1-Jan-16 110 Cash 147750 241 Notes paybale 147750 (Being 7% installment note obtained from bank) 31-Dec-16 710 Interest Expense 10342.5 241 Notes paybale 33277.5 110 Cash 43620.0 (Being payment of first installment debiting interest expense and notes pauyable) 31-Dec-17 710 Interest Expense 8013.1 241 Notes paybale 35606.9 110 Cash 43620.0 (Being payment of second installment debiting interest expense and notes pauyable) 31-Dec-18 710 Interest Expense 5521 241 Notes paybale 38099 110 Cash 43620.0 (Being payment of third installment debiting interest expense and notes pauyable) 31-Dec-19 710 Interest Expense 2854 241 Notes paybale 40766 110 Cash 43620.0 (Being payment of fourth installment debiting interest expense and notes pauyable) Ans c Interest expense reported in Income Statement 10342.5 $10,342.50 Note payable reported in Balance Sheet 147750-33277.5 114472.5

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