Homework Answers
| Answer to Question 1 | ||
| Annual Payment | 131309.129 | |
| P | A/D | |
| Loan amount (A) | ||
| A | 455000 | |
| Interest Rate (i) | ||
| i | 6% | |
| D | Discount Factor | |
| (D) = {[(1 + i) ^n] - 1} / [i(1 + i)^n] | ||
| Number of Periodic Payments (n) = Payments per year times number of years | ||
| n | 4 | |
| D | *((1+0.06)^4-1)/0.06(1+0.006)^4 | |
| 3.46510561 | ||
| P | 131309.129 | |
| Answer to Question 2 | ||||
| Payment | Opening Balance | Interest | Principal | Closing Balance |
| 1 | 455,000.00 | 27,300.00 | 104,009.13 | 350,990.87 |
| 2 | 350,990.87 | 21,059.45 | 110,249.68 | 240,741.19 |
| 3 | 240,741.19 | 14,444.47 | 116,864.66 | 123,876.54 |
| 4 | 123,876.54 | 7,432.59 | 123,876.54 | 0.00 |
Interest =Opening bal*6%
Principal=Annual Payments (Question 1 answer)-Interest for the specific period
Closing balance=Opening Balance-Principal
| Answer to Question 3 | ||
| Journal Entries | ||
| Debit | Credit | |
| Initial Sales Revenue | ||
| Notes Receivable | 455000 | |
| Sales | 455000 | |
| First Receipt of Notes Receivable | ||
| Cash | 131,309.13 | |
| Notes Receivable | 104,009.13 | |
| Interest Income | 27,300.00 | |
| Second Receipt of Notes Receivable | ||
| Cash | 131,309.13 | |
| Notes Receivable | 110,249.68 | |
| Interest Income | 21,059.45 | |
| Third Receipt of Notes Receivable | ||
| Cash | 131,309.13 | |
| Notes Receivable | 116,864.66 | |
| Interest Income | 14,444.47 | |
| Fourth Receipt of Notes Receivable | ||
| Cash | 131,309.13 | |
| Notes Receivable | 123,876.54 | |
| Interest Income | 7,432.59 | |
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