On January 1, a company borrowed cash by issuing a $460,000, 4%, installment note to be paid in three equal payments at the end of each year beginning December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) What would be the amount of each installment? Prepare an amortization table for the installment note. Prepare the journal entry for the second installment payment.
Answer | ||||
1 |
Borrowed | $ 460,000 | ||
Interest Rate (i) | 4% | |||
Years (n) | 3 years | |||
PVAF for 8% 3 Years | 2.77509 | |||
Annual Payment(460000/2.77509) | $ 165,760 | |||
2 | Amortization table | |||
No | Cash Payment | Interest expenses | Decease in balance | Outstanding balance |
460000 | ||||
1 | $ 165,760 | $ 18,400 | $ 147,360 | $ 312,640 |
2 | $ 165,760 | $ 12,506 | $ 153,254 | $ 159,386 |
3 | $ 165,760 | $ 6,375 | $ 159,386 | $ - |
3 | Interest account Dr | $ 12,506 | ||
Loan account Dr | $ 153,254 | |||
To Cash | $ 165,760 | |||
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