Exercise 14-8 Cullum ber Ltd. issued an instalment note on January 1, 2017 (with

Question

Exercise 14-8 Cullum ber Ltd. issued an instalment note on January 1, 2017 (with a required yield of 10%) in exchange for land that it purchased from Safayeni Ltd. Safayeni's real estate agent had listed the land on the market for $124,000. The note calls for three equal blended payments of $45,841 that are to be made at December 31, 2017, 2018, and 2019. Prepare an effective-interest amortization table for the instalment note for the three-year period. (Round answers to o decimal places, e.g. 5,275.Do not leave any answer field blank. Enter O for amounts. Effective Interest Amortization Table Effective Interest Method Reduction of Principal Carrying Amount Note Year Payment Interest 12/31/17 s 12/31/18 12/31/19 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO VIDEo

Explanation / Answer

Effective rate of interest =       r=(1+i/n)n-1 Where            r = Effective rate of interest                          n= Number of Compounding Period                          i= stated interest rate (1+.1/3)*3-1 ( 1+ 0.03333)* ( 1+0.03333)+ (1+0.03333)-1 1.10336-1 = 10.336 % Effective interest amortization table               Effective interest mathod Year Note Payment Interest Reduction of Principle Carrying amount 1-Jan-2017 $124,000 31-12-17 $45,841 $12,817.00 $33,024.00 $90,976.00 31-12-18 $45,841 $9,403.00 $36,438.00 $54,538.00 31-12-19 $45,841 $5,637.00 $40,204.00 $14,334.00 Journal Entery 1-1-2017 Debit Credit Lands account $124,000                         To Installment notes $124,000 ( Being installment notes issued for exchange in Land) Journal Entery 31-12-2017 Debit Credit Installment Notes accounts $45,841 To Principle accounts $33,024                         To Interest accounts $12,817 ( Being first instalment recorded)

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.