On January 1, a company borrowed cash by issuing a $300,000, 5%, installment note to be paid in three equal payments at the end

Question

2 years ago

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On January 1, a company borrowed cash by issuing a $300,000, 5%, 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)
1- What would be the amount of each installment?
2- Prepare an amortization table for the installmet note.
3- Prepare the journal entry for the second installment payment.

Business

1 answer:

Stella [2.4K] · Answer 1 · 2022-07-18T05:49:01+03:00

Answer & Explanation:

1- What would be the amount of each installment?

The principal to be paid in each instalment = $300,000/3 = $100,000

1st instalment = $300,000*5% + $100,000 = $115,000

2nd instalment = $200,000*5% + $100,000 = $110,000

3rd installment = $100,000*5% +$100,000 = $105,000

2- Prepare an amortization table for the instalment note.

Please see excel in attachment

3- Prepare the journal entry for the second installment payment.

Debit loan payables account: $100,000

Debit Interest expenses: $10,000

Credit cash: $110,000

Download xlsx