Question

Entries for Installment Note Transactions

On January 1, Year 1, Bryson Company obtained a $63,000, four-year, 12% installment note from Campbell Bank. The note requires annual payments of $20,742, beginning on December 31, Year 1.

a. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4.

Note: Round the computation of the interest expense to the nearest whole dollar. Enter all amounts as positive numbers. In Year 4, round the amount in the Decrease in Notes Payable column either up or down to ensure that the Carrying Amount zeroes out.

Amortization of Installment Notes
Year Ending December 31	January 1 Carrying Amount			Note Payment (Cash Paid)			Interest Expense (12% of January 1 Note Carrying Amount)					Decrease in Notes Payable			December 31 Carrying Amount
Year 1	$			$			$					$			$
Year 2
Year 3
Year 4															0
				$			$					$

b. Journalize the entries for the issuance of the note and the four annual note payments.

Note: For a compound transaction, if an amount box does not require an entry, leave it blank. For the Year 4 entry (due to rounding), adjust Notes Payable up or down to ensure that debits equal credits.

Year 1 Jan. 1
Year 1 Dec. 31
Year 2 Dec. 31
Year 3 Dec. 31
Year 4 Dec. 31

c. How will the annual note payment be reported in the Year 1 income statement?
  of $ would be reported on the income statement.

Answer 1

On Jan 1 of Year 1, Bryson Company obtained $ 63000 - 4 year 12%
As per Format	Jan 1 Carrying Amount $)-A	Note Payment ( Cash paid)-B	Interest Example 12% on Jan 1- Note Carrying amount )-C	Decrese in Note Payable $-D=(B-C)	Dec 31, Carrying Amount $E-( A-D)	Source
Year 1	63,000	20,742	7,560	13,182	49,818	Interest working as below)
Year 2	49,818	20,742	5,978	14,764	35,054
Year 3	35,054	20,742	4,206	16,536	18,519
Year 4	18,519	20,742	2,222	18,520	-1
Total		82,968	19,967	63,001
Year 1- Jan 1	Details	Debit($)	Credit($)
	Cash	63,000
	Note Payable		63,000
On Jan 1 of Year 1, Bryson Company obtained $ 63000 - 4 year 12%
31st Dec-Yr 1	Interest Expense	7,560		($63000*12%)
	Note Payable	13,182		( Balancing Number)
	Cash		20,742
	( Interest calculate 12% on $ 63000)
31st Dec-Yr 2	Interest Expense	5,978
	Note Payable	14,764
	Cash		20,742
31st Dec-Yr 3	Interest Expense	4,206
	Note Payable	16,536
	Cash		20,742
31st Dec-Yr 4	Interest Expense	2,222
	Note Payable	18,520
	Cash		20,742