Question

Problem 10-12A (Part Level Submission) Laverne purchased a new piece of equipment to be used in its new facility. The $400,000 piece of equipment was purchased with a $60,000 down payment and with cash received through the issuance of a $340,000, 8%, 5-year mortgage payable issued on January 1, 2017. The terms provide for annual installment payments of $85,155 on December 31. (a) Prepare an installment payments schedule for the first five payments of the notes payable. (Round answers to 0 decimal places, e.g. 125.) Annual Interest Period Reduction Cash Interest Principal Balance Payment of Principal Expense Issue Date $ $ 1 3 4 5 Amount may be off due to rounding. Open Show Work Click if you would like to Show Work for this question:

Answer 1

Annual Interest Period	Cash Payment	Interest Expense	Reduction of Principal	Principal Balance
Issue Date	0	0	0	340,000
1	85,155	340,000 x 8% = 27,200	85,155-27,200 = 57,955	340,000-57,955 = 282,045
2	85,155	282,045 x 8% = 22,564	85,155-22,564 = 62,591	282,045-62,591 = 219,454
3	85,155	219,454 x 8% = 17,556	85,155-17,556 = 67,599	219,454-67,599 = 151,855
4	85,155	151,855 x 8% = 12,148	85,155-12,148 =73,007	151,855-73,007 = 78,848
5	85,155	78,848 x 8% = 6,307	85,155-6,307 = 78,848	78,848-78,848 = 0

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