Question

Lake Company sold some machinery to View Company on January 1, 2017, for which the cash selling price was $758,200. View entered into an installment sales contract with Lake at a 10% interest rate. The contract required payments of $200,000 a year over five years with the first payment due on December 31, 2017. Required: Prepare an amortization schedule that shows what portion of each $200,000 payment will be shown as interest income over the period 2017–2021. (Round your answers to the nearest whole dollar amount.) Date Payments Interest Income Reduction of Principal Net Installments Due 1/1/17 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21

Answer 1

pls see following explanation below the table for understanding.

IN EACH LOAN REPAYMENT THERE WILL BE INTEREST AND COST. SO. WE NEED TO EXTRACT INTEREST AMOUNT AND PRINCIPAL AMOUNT.
Interest Calculation First year - 2017 to 2018. Loan ols is 758,200 Rate of Interest - 10% Installment = $200,000 Interest - $75820 (758200X10%) Principal Repay = 124 180 [Instal- Int] Loan ols after 758200 first year. ~) 124 180 634020 Second year - 2018 to 2019. Loan olsa 634020 Installment i 200000 Interest 63402. [634620X10%) Principal Repay: 136598 ( Instalt-Int) Loan ols after 634020 Second year - 1 3 6598 497422

Third year 2018 to 2019. Loan ols : 497,422 Installment: 200000 Interest (497422X10%) = 49742 Principle Repay = 150258 (Installment Interest) Loan ols after 497422 Third year 150258 347164 Fourth year - 2019 to 2020 loan ols: 347164 Installment: 200000 Interest (347164X10%) = 34716 Principle repay - 165284 (Install - Interest) loan ols after 4th year = 347164. E) 165284 181881 fifth year - 2020 to 2021 wanols = 181881 Installment - 200000 Interest =181881 X10%. = 18119 Principle repay = 200.000 loanok at end & 181881 - 16000 - 18119 181881 31881--181881
summary of above explanation.

Date	Payment	Interest Income	Principal Reduction	Bal ance
1/01/2017				758,200
12/31/2017	200,000	75,820	124,180	634,020
12/31/2018	200,000	63,402	136,598	497,422
12/31/2019	200,000	49,742	150,258	347,164
12/31/2020	200,000	34,716	165,284	181,881
12/31/2021	200,000	18,119	181,881	-