On November 1, 2017, Norwood borrows $600,000 cash from a bank by signing a five
ID: 2538880 • Letter: O
Question
On November 1, 2017, Norwood borrows $600,000 cash from a bank by signing a five-year installment note bearing 8% interest. The note requires equal payments of $150,274 each year on October 31. (Table BL Table B2 Table B3, and TableB 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 note.Explanation / Answer
Answer
1.
Amortization Table
Ending date
Opening Balance
Installment
Interest
Principal
Closing Balance
30-Oct-18
600,000.00
150,274.00
48,000.00
($600,000 * 8%)
102,274.00
($150,274 – 48,000)
497,726.00
($600,000 – 102,274)
30-Oct-19
497,726.00
150,274.00
39,818.08
110,455.92
387,270.08
30-Oct-20
387,270.08
150,274.00
30,981.61
119,292.39
267,977.69
30-Oct-21
267,977.69
150,274.00
21,438.21
128,835.79
139,141.90
30-Oct-22
139,141.90
150,274.00
11,131.35
139,142.65
(0.75)
Total
751,370.00
151,369.25
600,000.75
Interest = Opening Balance * 8%
Principal = Installment – Interest Amount
Closing Balance = Opening Balance – Principal Amount
2.
S No.
Debit
Credit
(a)
Interest Expense ($600,000 * 8% * 2/12 months)
8,000
Interest Payable
8,000
(Being interest due for 2 months i.e. November and December)
(b)
8% Note Payable (Principal)
102,274
Interest Expense ($600,000 * 8% * 10/12 months)
40,000
Interest Payable
8,000
Cash (Installment amount)
150,274
(Being payment done along with interest due and outstanding interest)
Amortization Table
Ending date
Opening Balance
Installment
Interest
Principal
Closing Balance
30-Oct-18
600,000.00
150,274.00
48,000.00
($600,000 * 8%)
102,274.00
($150,274 – 48,000)
497,726.00
($600,000 – 102,274)
30-Oct-19
497,726.00
150,274.00
39,818.08
110,455.92
387,270.08
30-Oct-20
387,270.08
150,274.00
30,981.61
119,292.39
267,977.69
30-Oct-21
267,977.69
150,274.00
21,438.21
128,835.79
139,141.90
30-Oct-22
139,141.90
150,274.00
11,131.35
139,142.65
(0.75)
Total
751,370.00
151,369.25
600,000.75
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.