On January 1 of Year 1 Bryson Company obtained a $168,500, four-year, 11% instal

Question

On January 1 of Year 1 Bryson Company obtained a $168,500, four-year, 11% installment note from Campbell Bank. The note requires annual payments of S54312, beginning on December 31 of Year 1 Required a. Prepare a 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. Refer to the Chart of Accounts for exact wording of account titles. c. Describe how the annual note payment would be reported on the Year 1 income statement.

Explanation / Answer

Ans.(a) Amortisation of installment Notes A B C D E For the year ending Dec. 31 Jan. 1 Carrying Value Note Payment Interest Expense Decrease in Notes Payable Dec.31 Carrying Value Year 1 $           168,500 $            54,312 $            18,535 $                               35,777 $                     132,723 Year 2 $           132,723 $            54,312 $            14,600 $                               39,712 $                       93,011 Year 3                 93,011                 54,312 $            10,231 $                               44,081 $                       48,930 Year 4                 48,930                 54,312 $              5,382 $                               48,930 0 $          217,248 $            48,748 $                             168,500 Ans.(b) Journal Entries Accouunt and Titles Dr.($) Cr.($) Year 1, Jan. Cash              168,500     To 11% Notes Payable              168,500 (Being Bryson Company obtain 11% Bonds from Campbell Bank ) Year 1, Dec. Interest Expense                 18,535 11% Notes Payable                 35,777     To Cash                54,312 (Being Interest and Face value of Bonds Payable ) Year 2, Dec. Interest Expense                 14,600 11% Notes Payable                 39,712     To Cash                54,312 (Being Interest and Face value of Bonds Payable ) Year 3, Dec. Interest Expense                 10,231 11% Notes Payable                 44,081     To Cash                54,312 (Being Interest and Face value of Bonds Payable ) Year 4, Dec. Interest Expense                   5,382 11% Notes Payable                 48,930     To Cash                54,312 (Being Interest and Face value of Bonds Payable ) Ans.(c) The Annual note payment would be reported on the year 1 Income Statement. Interest Expense of $ 18,535 would be reported on the income statement.

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