Question

On January 1, a company borrowed cash by issuing a $460,000, 4%, 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) What would be the amount of each installment? Prepare an amortization table for the installment note. Prepare the journal entry for the second installment payment.

Answer 1

Answer
1	Borrowed	$           460,000
	Interest Rate (i)	4%
	Years (n)	3 years
	PVAF for 8% 3 Years	2.77509
	Annual Payment(460000/2.77509)	$           165,760
2	Amortization table
No	Cash Payment	Interest expenses	Decease in balance	Outstanding balance
				460000
1	$                                                   165,760	$             18,400	$         147,360	$                    312,640
2	$                                                   165,760	$             12,506	$         153,254	$                    159,386
3	$                                                   165,760	$               6,375	$         159,386	$                             -
3	Interest account                Dr	$             12,506
	Loan account                       Dr	$           153,254
	To Cash		$         165,760