On February 1, Willmar Corporation borrowed $100,000 from its bank by signing a

Question

On February 1, Willmar Corporation borrowed $100,000 from its bank by signing a 12 percent, 15-year note payable. The note calls for 180 monthly payments of $1,250. Each payment includes an interest and a principal component. a. Compute the interest expense in February. b. Compute the portion of Willmar's March 31 payment that will be applied to the principal of the note. (Round your intermediate calculations and final answer to the nearest dollar amount.) c. Compute the carrying value of the note on April 30.(Round your intermediate calculations and final answer to the nearest dollar amount.) a. Interest expense b. Principal c. Carrying value

Explanation / Answer

1) Interest expense in february = 100000*12%*1/12 = 1000

2) Calculate principal portion of march 31 payment :

Interest expense in march 31 payment = (100000-250)*12%*1/12 = 998

Principal payment = (1250-998) = 252

3) Carrying value of note on april 30 :

April 30 interest expense = (100000-250-252)*12%*1/12 = 995

Principal = (1250-995) = 255

Carrying value of note = (100000-250-252-255) = 99243

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