Question

Question 4 Not complete Marked out of 50.00 P Flag question Recording Entries for an installment Note Payable On January 1, 2020, a borrower signed a long-term note, face amount, 540,000; time to maturity, three years; stated rate of interest, 8%. The market rate of interest of 10% determined the cash received by the borrower. The note will be paid in three equal annual installments of $15,521 each December 31 (which is also the end of the accounting period for the borrower). Required a. Compute the cash received by the borrower and prepare a debt amortization schedule, • Note: Round your answer to the nearest whole dollar. Sunport 1. Compute the cash received by the borrower. 2. Prepare a debt amortization schedule. • Note: Round each amount in the table to the nearest whole dollar. • Note: Use a negative sign for the "Reduction in N.P." amounts. Interest Expense Reduction in N.P. Carrying Value Date C ash Jan, 1, 2020 Dec 31, 2020 $ Dec 31, 2021 Dec 31, 2022 Total b. Provide the required entries for the borrower for the issuance of the note on January 1, 2020, and the interest payments in 2020, 2021, and 2022. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answer to the nearest whole dollar. Date Account Name Dr. Cr.

Answer 1

a.
1	Cash received by the borrower
	=40000*8%/10%
	$32,000
2	Debt Amortization Schedule
Date	Cash	Interest Expense	Reduction in N.P	Carrying Value
Jan 1, 2020				$40,000
Dec 31, 2020	$15,521	$3,200	-$12,321	$27,679
Dec 31, 2021	$15,521	$2,214	-$13,307	$14,372
Dec 31, 2022	$15,521	$1,149	-$14,372	$0
Total	$46,563	$6,563	-$40,000

b.	Journal Entries
Date	Account Name	Dr.	Cr.
Jan 1, 2020	Cash Dr	$32,000
	Discount on Note Payable	$8,000
	To Note Payable		$40,000
Dec 31, 2020	Interest Expense Dr	$3,200
	Note Payable Dr	$12,321
	To Cash		$15,521
Dec 31, 2021	Interest Expense Dr	$2,214
	Note Payable Dr	$13,307
	To Cash		$15,521
Dec 31, 2022	Interest Expense Dr	$1,149
	Note Payable Dr	$14,372
	To Cash		$15,521