Exercise 10-10 Installment note with equal total payments LO C1 On January 1, 20

Question

Exercise 10-10 Installment note with equal total payments LO C1 On January 1, 2017, Eagle borrows $32,000 cash by signing a four-year, 996 installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 2017 through 2020. Table B1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) Prepare an amortization table for this installment note Payments Period Ending Date 2015 2016 2017 2018 Total Ending Beginning Debit Interest Debit Notes Expense Credit Balance Payable Cash Balance 32,000 S 2,880 2,880

Explanation / Answer

Take Present Value of Annuity for 4 Years @9% from Table B-3=3.2397

Borrow Amount=$32,000

Installment Amount=Borrow Amount/Present Value of Annuity for 4 Years @9%

=$32,000/3.2397

=$9877.46

Amortization Table:

Payments (A) (B) (C) (D) (F) Formula (A)*9% (A)+(B) (C)-(D) Period Ending Beginning Debit Interest Debit Notes   Credit Closing Date Balance Expenses Payable Cash Balance 2017 32,000.00             2,880.00       34,880.00     9,877.46 25,002.54 2018 25,002.54             2,250.23       27,252.77     9,877.46 17,375.31 2019 17,375.31             1,563.78       18,939.09     9,877.46     9,061.63 2020     9,061.63                 815.83          9,877.46     9,877.46             0.00 Total             7,509.84 39,509.83

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