Question

THIS IS FOR QUESTION #2

Problem 1 To help with cash flow, Scott’s Camping World (SCW) borrowed $60,000 from their bank on January 1, 2023, by issuing a 6-year, 8% installment loan. Payments of $12,979 are due each year on December 31, beginning in 2023

. What is the principal balance on this installment note at the end of 2025 after the loan payment is recorded? Round your answers to the nearest whole dollar. (Hint: Use an amortization schedule to determine your answer.)

Question 2

Refer back to Problem #1. In addition to the installment loan, SCW issued $200,000 of 5-year, 7% bonds for $190,000 on January 1, 2023. Interest is paid semiannually on June 30 and December 31. SCW uses the straight-line method for amortizing bond discounts and premiums. SCW also had the following financial information during the life of the loan: earned cash revenue of $75,000 each year, paid cash operating expenses of $30,000 each year, purchased land in 2023 for $30,000, and purchased computer equipment in 2025 for $6,500 (estimated useful life of 5 years and salvage value of $600).

What is SCW’s net income for 2025?

What is SCW’s total assets for 2025?

What is the carrying value of SCW’s bonds in 2025?

What is SCW’s total liabilities for 2025?

Answer 1

Problem 1:

Year	Payment	Interest	Principal	O/S Principal
2023	$ 12,979	$   4,800	$     8,179	$           51,821
2024	$ 12,979	$   4,146	$     8,833	$           42,988
2025	$ 12,979	$   3,439	$     9,540	$           33,448
2026	$ 12,979	$   2,676	$ 10,303	$           23,145
2027	$ 12,979	$   1,852	$ 11,127	$           12,017
2028	$ 12,979	$       961	$ 12,017	$                      0
The principal balance on this installment note at the end of 2025 after the loan payment is recorded is $ 33,448

Question 2

Net Income for 2025
Cash revenue	$          75,000
Cash Operating expenses	$        (30,000)
Earnings before interest, depreciation & Amortization	$          45,000
Less Depreciation (6500-600/5)	$          (1,180)
Less Amortization on discount on issue of bonds (10000/5)	$          (2,000)
Earnings before interest	$          41,820
Less Interest on Installment Note	$          (3,439)
Less Interest on bond (7% on $ 200000)	$        (14,000)
Net Income for the year 2025	$          24,381

Total assets for 2025
Land	$          30,000
Equipment (6500-1180)	$            5,320
Cash (190000+60000-30000)	$        220,000
Discount on issue of Bonds	$            4,000
Total Assets	$        259,320
The carrying value of SCW’s bonds in 2025
Bonds Face value	$        200,000
Less Discount on Bonds for 2 years	$          (4,000)
Carrying amount of Bonds	$        196,000
Total Liabilities for 2025
Installment Notes O/S Principal	$          33,448
Bonds	$        200,000
Retained Earnings	$          25,872
Total Liabilities	$        259,320
We have not calculated the net income for 2023 and 2024 since the question not asked specifically. As a result the retained earnings are not correct.