Exercise 10-14 Installment note with equal total payments LO C1, P5 On January 1
ID: 2766093 • Letter: E
Question
Exercise 10-14 Installment note with equal total payments LO C1, P5
On January 1, 2013, Eagle borrows $21,000 cash by signing a four-year, 5% installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 2013 through 2016. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.)
Compute the amount of each of the four equal total payments.
2.Prepare an amortization table for this installment note. (Round your intermediate calculations to the nearest dollar amount.)
On January 1, 2013, Eagle borrows $21,000 cash by signing a four-year, 5% installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 2013 through 2016. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.)
Explanation / Answer
1.
Compute the amount of each of the four equal total payments:
As per financial calculator
Principle amount is $21,000
Interest rate PA is 5%
Number payments = 4
Each equal installment is $5,415.08
2.
Prepare the amortization schedule:
Date
Principal
Interest
Cum pri
Cum int
Prinicipal
balance
2013
$ 5,152.58
$ 262.50
$ 5,152.58
$ 262.50
$ 15,847.42
2014
$ 5,216.99
$ 198.09
$ 10,369.57
$ 460.59
$ 10,630.43
2015
$ 5,282.20
$ 132.88
$ 15,651.77
$ 493.47
$ 5,348.23
2016
$ 5,348.23
$ 66.85
$ 21,000.00
$ 660.32
$ -
Date
Principal
Interest
Cum pri
Cum int
Prinicipal
balance
2013
$ 5,152.58
$ 262.50
$ 5,152.58
$ 262.50
$ 15,847.42
2014
$ 5,216.99
$ 198.09
$ 10,369.57
$ 460.59
$ 10,630.43
2015
$ 5,282.20
$ 132.88
$ 15,651.77
$ 493.47
$ 5,348.23
2016
$ 5,348.23
$ 66.85
$ 21,000.00
$ 660.32
$ -
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