On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down payment and issued...

Question

Question

On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down payment and issued a lon

business accounting

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Interest expense in year 2 = $5714

*The values might vary slighly since PVAF has been rounded off to 3 decimal places instead of 4.

Please comment in case of any issue and I will be happy to help.

Notes

Lets first calculate the value of loan at present date by using Present Value of Annuity formula:

= 35000*(5*2 half yearly periods)*(4%/2 semi annual interest rate)

= 35000*PVAF at 2% for 10 years = 35000*8.983 = $314405

To solve such questions, it is always better to prepare an amortization schedule

Months	EMI	Interest	Principal	Bal.principal
	Given	principal o/s * Interest Rate	EMI - Interest	previous bal - principal repaid
0				$ 3,14,405
1	$ 35,000.0	$ 6,288.10	$ 28,712	$ 2,85,693
2	$ 35,000.0	$ 5,713.86	$ 29,286	$ 2,56,407
3	$ 35,000.0	$ 5,128.14	$ 29,872	$ 2,26,535
4	$ 35,000.0	$ 4,530.70	$ 30,469	$ 1,96,066
5	$ 35,000.0	$ 3,921.32	$ 31,079	$ 1,64,987
6	$ 35,000.0	$ 3,299.74	$ 31,700	$ 1,33,287
7	$ 35,000.0	$ 2,665.74	$ 32,334	$ 1,00,953
8	$ 35,000.0	$ 2,019.05	$ 32,981	$ 67,972
9	$ 35,000.0	$ 1,359.43	$ 33,641	$ 34,331
10	$ 35,000.0	$ 686.62	$ 34,331	$ 0
Total	$ 3,50,000	$ 35,613	$ 3,14,405

Add a comment

Answer 2

Similar Homework Help Questions

On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down...

On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down payment and issued a long-term note to finance the balance. The note, which carries an interest rate of 4%, requires Jenga to make semiannual loan payments of $35,000 for five years, with the first payment due on June 30, 2016. Determine the amount of interest expense Jenga will record with the SECOND interest payment (on December 31, 2016). Round all parts of your calculation...
On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down...

On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down payment and issued a long-term note to finance the balance. The note, which carries an interest rate of 4%, requires Jenga to make semiannual loan payments of $35,000 for five years, with the first payment due on June 30, 2016. Determine the amount of interest expense Jenga will record with the SECOND interest payment (on December 31, 2016). Round all parts of your calculation...
S Powered by B eCampus ePortfolios Community Content Collection s > HW Assignment 10-Chapter 10 Menu...

S Powered by B eCampus ePortfolios Community Content Collection s > HW Assignment 10-Chapter 10 Menu QUESTION9 Correct Mark 1,00 out of 1,.00 PFlag question Edit question On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down payment and issued a long-term note to finance the balance. The note, which carries an interest rate of 4%, requires Jenga to make semiannual loan payments of $35,000 for five years, with the first payment due on...

Chowan Corporation issued $154,000 of 7% bonds dated January 1, 2016, for $148,815.79 on January 1,...

Chowan Corporation issued $154,000 of 7% bonds dated January 1, 2016, for $148,815.79 on January 1, 2016. The bonds are due December 31, 2019, were issued to yield 8%, and pay interest semiannually on June 30 and December 31. Chowan uses the effective interest method of amortization. Required: Prepare the journal entries to record the issue of the bonds on January 1, 2016, and the interest payments on June 30, 2016, December 31, 2016, and June 30, 2017. In addition,...
please solve these for me,thanks! 2016 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July...

please solve these for me,thanks! 2016 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 2016, at a mar- ket (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30. 1. Borrowed $200,000 by issuing a six-year, 6% installment note to Nicks Bank. The note requires annual payments of $40,673, with the first payment occurring on September 30, 2017. July Oct. Dec. 31. Accrued $3,000 of interest on the installment...
Chowan Corporation issued $136,000 of 7% bonds dated January 1, 2016, for $131,421.73 on January 1,...

Chowan Corporation issued $136,000 of 7% bonds dated January 1, 2016, for $131,421.73 on January 1, 2016. The bonds are due December 31, 2019, were issued to yield 8%, and pay interest semiannually on June 30 and December 31. Chowan uses the effective interest method of amortization. 1. Required: Prepare the journal entries to record the issue of the bonds on January 1, 2016, and the interest payments on June 30, 2016, December 31, 2016, and June 30, 2017. In...

Ari Goldstein issued $700,000 of 15% 12 year bonds payable on january 1, 2016. The market...

Ari Goldstein issued $700,000 of 15% 12 year bonds payable on january 1, 2016. The market interest rate at the date of issuance was 14% and the bonds pay interest semianually. Requirments 1. How much cash did the company receive upon issuance of bonds payable? 2. Prepare an amortization table for the bond using effective interest method, through the first two interest payments (round all numbers to the nearest whole dollar) 3. Journalize the issuance of the bonds on January...
On January 1, 2015, Stronger Industries issued $480,000 of 9%, five-year bonds that pay interest semiannually...

On January 1, 2015, Stronger Industries issued $480,000 of 9%, five-year bonds that pay interest semiannually on June 30 and December 31. They are issued at $499,483 and their market rate is 8% at the issue date. After recording the entry for the issuance of the bonds, Bonds Payable had a balance of $480,000 and Premium on Bonds Payable had a balance of $19,483. Stroger uses the effective interest bond amortization method. The first semiannual interest payment was made on...
January 15 2016 and were The Mariner Company, a calendar-year corporation, issued $500,000 of $1.000 so...

January 15 2016 and were The Mariner Company, a calendar-year corporation, issued $500,000 of $1.000 so bonds at a price generating a 4% yield. The bonds were dated January 15 2016 issued that day. The bonds mature January 15 2026. The bonds pay interest Semi annually on July 15 and January 1st of each year. 1. Using the straight-line method of amortization and the effective interest ra method of amortization prepare an amortization schedule for the bonds listin a. Date...

On January 1, 2019, Agree Company issued $85,000 of five-year, 8% bonds when the market interest...

On January 1, 2019, Agree Company issued $85,000 of five-year, 8% bonds when the market interest rate was 12%. The issue price of the bonds was $62,401. Agree uses the effective-interest method of amortization for bond discount. Semiannual interest payments are made on June 30 and December 31 of each year. Which of the following is the correct journal entry to record the first interest payment? (Round all amounts to the nearest whole dollar.) A. Interest Expense 3,400 Discount on...

On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down payment and issued...

Homework Answers

Add Answer to:
On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down payment and issued...

Post as a guest

Earn Coins