Question

On November 1, 2018, Norwood borrows $440,000 cash from a bank by signing a five-year installment note bearing 7% interest. The note requires equal payments of $107,312 each year on October 31. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) Required: 1. Complete an amortization table for this installment note. 2. Prepare the journal entries in which Norwood records the following: (a) Accrued interest as of December 31, 2018 (the end of its annual reporting period). (b) The first annual payment on the note.

Answer 1

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Format and naming is not available, can be slightly different: Discount table are not provided, Answer can be rounded per question. Numbers in Amortization table can be +/- $1: Solution: B=A*7% CED-B D (given) E=A-C Period Beginning Debit Interest Note Credit Ending Balance Expense Payable Cash Balance 10/31/2019 440000 30800 76512 107312 363488 10/31/2020 363488 25444 81868 107312 281620 10/31/2021 281620 19713 87599 107312. 194022 10/31/2022 194022 13582 93730 107312 100291 10/31/2023 7020 100292 107312 2) Credit Debit $ 5,133 Naming convention is not available, can be slightly different: Journal Entires Date Account title and explaination Dec.31 Interest Expense (440000*7%)/12*2 2018 Interest Payable (To record the accrual of interest) Oct.31 Interest Expense (440000*7%)/12*10 2019 Interest Payable (440000*7%)/12*2 Note Payable 5133.33 5133.33 $ 5,133 $ 25,667 $ 5,133 $ 76,512 Cash 107312 (To record the first interest payment)