On January 1, a company borrowed cash by issuing a $480,000, 6%, 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) (Use appropriate factor(s) from the tables provided.)
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.
What would be the amount of each installment? (Round final answers to the nearest whole dollar.)
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Prepare an amortization table for the installment note. (Round your intermediate calculations to the nearest dollar. Round final answers to the nearest whole dollar.)
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Note: Enter debits before credits.
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Answers
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Table or calculator function: |
|
|
Amount Borrowed: |
$480,000 |
|
n = |
3 |
|
i = [Table 6: PVA of $1] |
6% [value to be used 2.67301] |
|
Annual Payment: = 480000 / 2.67301 |
$179,573 |
|
Cash Payment |
Interest Expense |
Decrease in Balance |
Outstanding balance |
|
|
$480,000 |
||||
|
1 |
$179,573 |
$28,800 |
$150,773 |
$329,227 |
|
2 |
$179,573 |
$19,754 |
$159,819 |
$169,408 |
|
3 |
$179,573 |
$10,164 or $ 10165 |
$169,408 |
($0) |
|
TOTAL |
$538,719 |
$58,718 |
$480,000 |
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Accounts title |
Debit |
Credit |
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Interest expense |
$19,754 |
|
|
Notes Payable |
$159,819 |
|
|
Cash |
$179,573 |
|
|
(Second installment paid) |
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