On November 1, 2017, Norwood borrows $520,000 cash from a bank by signing a five-year installment note bearing 6% interest. The note requires equal payments of $123,445 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.
There is a REQ 1 tab and REQ 2A and 2B tab for answers
1 | Amortization Table | ||||||
Period Ending Date |
Beginning Balance |
Debit interest expense |
Debit Notes payable |
Credit Cash |
Ending balance |
||
31/10/18 | 520000 | 31200 | 92245 | 123445 | 427755 | ||
(520000*6%) | (123445-31200) | ||||||
31/10/19 | 427755 | 25665 | 97780 | 123445 | 329975 | ||
(427755*6%) | (123445-25665) | ||||||
31/10/20 | 329975 | 19799 | 103647 | 123445 | 226329 | ||
(329975*6%) | (123445-19799) | ||||||
31/10/21 | 226329 | 13580 | 109865 | 123445 | 116464 | ||
(226329*6%) | (123445-13580) | ||||||
31/10/22 | 116464 | 6981 | 116464 | 123445 | 0 | ||
(diff. Due to roundoff) |
|||||||
Date | General Journal | Debit | Credit | ||||
2A. | Dec 31,2017 | Interest expense | (31200*2/12) | 5200 | |||
Interest payable | 5200 | ||||||
(Accrued interest on instalment note) | |||||||
2B. | Oct 31,2018 | Interest expense | 31200 | ||||
Notes payable | 92245 | ||||||
Cash | 123445 | ||||||
(First annual payment on note) | |||||||
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