On November 1, 2017, Norwood borrows $530,000 cash from a bank by signing a five
ID: 2523106 • Letter: O
Question
On November 1, 2017, Norwood borrows $530,000 cash from a bank by signing a five-year installment note bearing 5% interest. The note requires equal payments of $122,416 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 an amortization table for this installment note. 2. Prepare the journal entries in which Norwood records the following (a) Accrued interest as of December 31, 2017 (the end of its annual reporting period) (b) The first annual payment on the noteExplanation / Answer
a Amortization table for note installments a b c d e =(a*5/100) =(122416-b) =(b+c) =(a-d) Period ending date Beginning Balance Debit interest expense debit note payable credit cash closing balance 10/31/2018 $ 530,000 $ 26,500 $ 95,916 $ 122,416 $ 434,084 10/31/2019 $ 434,084 $ 21,704 $ 100,712 $ 122,416 $ 333,372 10/31/2020 $ 333,372 $ 16,669 $ 105,747 $ 122,416 $ 227,625 10/31/2021 $ 227,625 $ 11,381 $ 111,035 $ 122,416 $ 116,590 10/31/2022 $ 116,590 $ 5,830 $ 116,586 $ 122,416 Nil Total $ 1,641,671 $ 82,084 $ 529,996 $ 612,080 $ 1,111,671 b Interest on note payable A/c Dr $ 4,416.67 (26500*2/12) to Note Payable A/c $ 4,416.67 As at 12/31/2017 interest accrued c Interest on note payable A/c Dr $ 26,500 Installment on note payable A/c Dr $ 95,916 to Bank A/c $ 122,416
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