Question

 Problem 10-5A Installment notes LO C

 On November 1, 2019, Norwood borrows $490,000 cash from a bank by signing a five-year installment note bearing 7% interest. The note requires equal payments of $119,506 each year on October 31.

 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, 2019 (the end of its annual reporting period).

 (b) The first annual payment on the note.

Answer 1

Answer -

1. Answer -

Period Ending Date	Beginning Balance (A)	Debit Interest Expense (B)   [7% * (A)]	Debit Notes Payable (C) [(D) - (B)]	Credit Cash (D)	Ending Balance (E)   [(A) - (C)
10/31/2020	$490000	$34300	$85206	$119506	$404794
10/31/2021	$404794	$28335	$91171	$119506	$313623
10/31/2022	$313623	$21953	$97553	$119506	$216070
10/31/2023	$216070	$15124	$104382	$119506	$111688
10/31/2024	$111688	$7818	$111688	$119506	$0
Total		$107530	$490000	$597530

2. a. Answer -

Date	General Journal	Debit	Credit
Dec. 31, 2019	Interest expense [$34300 * (2/12)]	$5717
	Interest payable		$5717

2. b. Answer -

Date	General Journal	Debit	Credit
Oct. 31, 2020	Interest expense [$34300 * (10/12)]	$28583
	Interest payable [$34300 * (2/12)]	$5717
	Note payable	$85206
	Cash		$119506