Question

Problem 10-6A Installment notes LO C1 On November 1, 2017, Norwood borrows $200,000 cash from a bank by signing a five-year installment note bearing 8% interest. The note requires equal payments of $50,091 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.

Answer 1

	A	B	C	D	E
Period ending date	Beginning Balance	Debit Interest expense 8% x A	Debit Notes Payable D- B	Credit Cash	Ending balance A -C
10/31/2018	200,000	16000	34091	50091	165,909
10/31/2019	165,909	13273	36818	50091	129,091
10/31/2020	129,091	10327	39764	50091	89,327
10/31/2021	89,327	7146	42945	50091	46,382
10/31/2022	46,382	3711	46382	50091	0

(Answers in journal cam be rounded off if required)

Date	Account titles and Explanation	Debit	Credit
12/31/2017	Interest expense	2666.67
	Interest payable		2666.67
	[200,000*8%*2/12]
10/31/2018	Interest expense	13333.33
	Interest payable	2666.67
	Notes payable	34091
	Cash		50091