Question

On November 1, 2017, Norwood borrows $520,000 cash from a bank by signing a five-year installment note bearing 6% interest. The note requires equal payments of $123,445 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, 2017 (the end of its annual reporting period).
(b) The first annual payment on the note.

There is a REQ 1 tab and REQ 2A and 2B tab for answers

Answer 1

1	Amortization Table
	Period Ending Date	Beginning Balance	Debit interest expense	Debit Notes payable	Credit Cash	Ending balance
	31/10/18	520000	31200	92245	123445	427755
			(520000*6%)	(123445-31200)
	31/10/19	427755	25665	97780	123445	329975
			(427755*6%)	(123445-25665)
	31/10/20	329975	19799	103647	123445	226329
			(329975*6%)	(123445-19799)
	31/10/21	226329	13580	109865	123445	116464
			(226329*6%)	(123445-13580)
	31/10/22	116464	6981	116464	123445	0
			(diff. Due to roundoff)
	Date	General Journal			Debit	Credit
2A.	Dec 31,2017	Interest expense		(31200*2/12)	5200
		Interest payable				5200
		(Accrued interest on instalment note)
2B.	Oct 31,2018	Interest expense			31200
		Notes payable			92245
		Cash				123445
		(First annual payment on note)