On November 1, 2013, Norwood borrows $490,000 cash from a bank by signing a five
ID: 2483823 • Letter: O
Question
On November 1, 2013, Norwood borrows $490,000 cash from a bank by signing a five-year installment note bearing 7% interest. The note requires equal total payments each year on October 31. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) Required: 1. Complete the below table to calculate the total amount of each installment payment. 2. Complete an amortization table for this installment note. (Round your intermediate calculations to the nearest dollar amount.) 3. Prepare the journal entries in which Norwood records the following: (a) Accrued interest as of December 31, 2013 (the end of its annual reporting period). (b) The first annual payment on the note.
Explanation / Answer
Answer 1. Intial Cash proceeds / PV Factor = Amount of annual Payment 490,000 / 4.1002 = 119,506 Answer 2. Amortization Table Period Ending Date Beginning Balance Debit Interest Exp. Debit Note Payable Credit Cash Ending Balance 31/10/2014 490,000 34,300 85,206 119,506 404,794 31/10/2015 404,794 28,336 91,170 119,506 313,623 31/10/2016 313,623 21,954 97,552 119,506 216,071 31/10/2017 216,071 15,125 104,381 119,506 111,690 31/10/2018 111,690 7,818 111,690 119,508 0 Answer 3. Journal Entry Date Particulars Dr. Amt Cr. Amt 31/12/2013 Interest Exp. Dr. 5,717 To Interest Payable 5,717 (Record the Interst due) Interest Due - $490,000 X 7% X 2/12 = $5,717 31/10/2014 Interest Exp. Dr. 28,583 Interest Payable Dr. 5,717 Notes Payable Dr. 85,206 To Cash 119,506 (Record the first annual payment of Note)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.