On November 1, 2017, Norwood borrows $410,000 cash from a bank by signing a five

Question

On November 1, 2017, Norwood borrows $410,000 cash from a bank by signing a five-year installment note bearing 9% interest. The note requires equal payments of $105,407 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 note.

Explanation / Answer

Period EndingDate BeginningBalance Interest Expense Debit Notes Payable Credit Cash Ending Balance 10/31/2018 410000 36900 68507 105407 341493 10/31/2019 341493 30734 74673 105407 266820 10/31/2020 266820 24014 81393 105407 185427 10/31/2021 185427 16688 88719 105407 96708 10/31/2022 96708 8699 96708 105407 0 2a Interest expense 6150 =410000*9%/12*2       Interest payable 6150 b Cash 105407       Notes payable 68507       Interest expense 30750       Interest payable 6150

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