Question

FinanceCo lent $8.3 million to Corbin Construction on January 1, 2021, to construct a playground. Corbin signed a three-year, 5% installment note to be paid in three equal payments at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Prepare the journal entry for FinanceCo’s lending the funds on January 1, 2021.
2. Prepare an amortization schedule for the three-year term of the installment note.
3. Prepare the journal entry for the first installment payment on December 31, 2021.
4. Prepare the journal entry for the third installment payment on December 31, 2023.

	Dec. 31 Cash Payment Effective Interest Decrease in Balance Outstanding Balance 2021 2022 2023

Answer 1

Answert Pcalculation of the amount of instatment paymenti- Instalment payment = Amount of loan/present volues of - an ordinary annuity of & 1 for a periods at 5% present value of ordinary. Qunuilty of $ 5p – (1+r) 3 = 2.723248 Instalment payment = $8300000/2.723248 . Instalment payment = $3,047,831 Ealculation of amortization schedule for syears Dec 31 Cash paynd Effective Interest Balance outstanding @ 5%ou outstandig Reduction (A) (B) I balance (6) balance (0-0-0) $8,300.000 2001 $3047,831 $ 415.000 $2,632,831 $5,667,169 2022 $3,047,81 $283,358 $2,764,473 $2,902,696 2023 H3047831 $ 145/35 $2,902,696 $ 0 $9143,493 843, 493 $8.300.000 Journal entries Dale I particulars LE Debit Credit 2021 Notes Receivable Ale To Cash being the leading of fends]. 3047831 $2,639,6311 To Notes Receivable TO Interest Revenue |$415,000 Belug the first Iustalment payment] 4 53047831 eash Ale $2902696 TO Notes Receivable $145135 To Interest Revenue Being third instalment paymeut? DY Jaurl $8.300.000 $8.300,000 becat cash Ale