Question

Entries for Installment Note Transactions On January 1 of Year 1, Bryson Company obtained a $45,000, four-year, 8 % installment note from Campbell Bank. The note requires annual payments of $13,586, beginning on December 31 of Year 1 a. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4. Round the computation of the interest expense to the nearest whole dollar. Enter all amounts as positive numbers Amortization of Installment Notes Interest Expense Note Payment (8% of January 1 Decrease in December 31 January 1 Carrying Amount Notes Payable Carrying Amount For the Year Ending (Cash Paid) Note Carrying Amount) Year 1 Year 2 Year 3 Year 4 b. Journalize the entries for the issuance of the note and the four annual note payments. If an amount box does not require an entry, leave it blank. Year 1 Jan. 1 Year 1 Dec. 31 Year 2 Dec. 31

Answer 1

Answer a. For the Year Ending Year 1 Year 2 Year 3 Year 4 Amortization of Installment Notes January 1 December 31 Interest Decrease in Carrying Note Payment Carrying Expense Notes Payable Amount Amount $ 45,000 $ 13,586 $ 3,600$ 9,986 $ 35,014 $ 35,014 $ 13,586 $ 2,801 $ 10,785 $ 24,229 $ 24,229 $ 13,586 $ 1,938 $ 11,648 $ 12,581 $ 12,581 $ 13,586 $ 1,005 $ 12,581 $ 45,000 $ 45,000 3,600 9,986 $ 13,586 Answer b. Year 1 Jan. 1 Cash Notes Payable Year 1 Dec. 31 Interest Expense Notes Payable Cash Year 2 Dec. 31 Interest Expense Notes Payable Cash Year 3 Dec. 31 Interest Expense Notes Payable Cash Year 4 Dec. 31 Interest Expense Notes Payable Cash 2,801 10,785 $ 13,586 1,938 11,648 $ 13,586 1,005 12,581 $ 13,586 Answer c. Interest expense of $3,600 would be reported on the income statement.