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Entries for installment note transactions On January 1 of Year 1, Bryson Company obtained a $147,750, 4-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31 of Year 1. a. Prepare a table for this installment note, similar to the one presented in Exhibit 4. Enter all amounts as positive numbers. (Note: Due to rounding, the Year 4 Interest expense is provided.) Round the computation of the interest expense to the nearest whole dollar. If an amount box does not require an entry, leave blank. Amortization of Installment Notes Interest Expense (7% of January 1 Note Carrying Amount) 10,343 ✔ 8,013 5,521 For the Year Ending Dec. 31 Year 1 Year 2 Year 3 January 1 Carrying Amount 147,750 ✔ 114,473 ✔ 78,866 ✔ Note Payment (Cash Paid) 43,620 ✔ 43,620 43,620 ✓ ✓ Decrease in Notes Payable 35,607 ✔ 38,099 ✓ December 31 Carrying Amount $ 114,473 ✔ 78,866 ✔

Entries for installment note transactions On January 1 of Year 1, Bryson Company obtained a $147,750, 4-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31 of Year 1. a. Prepare a table for this installment note, similar to the one presented in Exhibit 4. Enter all amounts as positive numbers. (Note: Due to rounding, the Year 4 Interest expense is provided.) Round the computation of the interest expense to the nearest whole dollar. If an amount box does not require an entry, leave blank. Amortization of Installment Notes Interest Expense (7% of January 1 Note Carrying Amount) 10,343 ✔ 8,013 5,521 For the Year Ending Dec. 31 Year 1 Year 2 Year 3 January 1 Carrying Amount 147,750 ✔ 114,473 ✔ 78,866 ✔ Note Payment (Cash Paid) 43,620 ✔ 43,620 43,620 ✓ ✓ Decrease in Notes Payable 35,607 ✔ 38,099 ✓ December 31 Carrying Amount $ 114,473 ✔ 78,866 ✔

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Entries for installment note transactions On January 1 of Year 1, Bryson Company obtained a $147,750, 4-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31 of Year 1. a. Prepare a table for this installment note, similar to the one presented in Exhibit 4. Enter all amounts as positive numbers. (Note: Due to rounding, the Year 4 Interest expense is provided.) Round the computation of the interest expense to the nearest whole dollar. If an amount box does not require an entry, leave it blank. Amortization of Installment Notes Interest Expense (7% of January 1 Note Carrying Amount) 10,343 For the Year Ending Dec. 31 Year 1 Year 2 Year 3 Year 4 Feedback January 1 Carrying Amount 147,750 114,473 78,866 Note Payment (Cash Paid) 43,620 43,620 43,620 43,620 8,013 5,521 Decrease in Notes Payable $ 35,607 38,099 December 31 Carrying Amount $ 114,473 78,866 0 Check My Work The cash payment is the same in each year. The interest and principal repayment, however, change each year. This is because the carrying amount (book value) of the note decreases each year as principal is repaid, which decreases the interest. After the final payment, the carrying amount on the note is zero, indicating that the note has been paid in full.
Transcribed Image Text:Entries for installment note transactions On January 1 of Year 1, Bryson Company obtained a $147,750, 4-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31 of Year 1. a. Prepare a table for this installment note, similar to the one presented in Exhibit 4. Enter all amounts as positive numbers. (Note: Due to rounding, the Year 4 Interest expense is provided.) Round the computation of the interest expense to the nearest whole dollar. If an amount box does not require an entry, leave it blank. Amortization of Installment Notes Interest Expense (7% of January 1 Note Carrying Amount) 10,343 For the Year Ending Dec. 31 Year 1 Year 2 Year 3 Year 4 Feedback January 1 Carrying Amount 147,750 114,473 78,866 Note Payment (Cash Paid) 43,620 43,620 43,620 43,620 8,013 5,521 Decrease in Notes Payable $ 35,607 38,099 December 31 Carrying Amount $ 114,473 78,866 0 Check My Work The cash payment is the same in each year. The interest and principal repayment, however, change each year. This is because the carrying amount (book value) of the note decreases each year as principal is repaid, which decreases the interest. After the final payment, the carrying amount on the note is zero, indicating that the note has been paid in full.
Year 3 Dec. 31 Interest Expense Notes Payable Cash Year 4 Dec. 31 Interest Expense Notes Payable Cash Feedback 5,521 38,099 XX 43,620 X ▼ Check My Work The cash payment is the same in each year. The interest and principal repayment, however, change each year. This is because the carrying amount (book value) of the note decreases each year as principal is repaid, which decreases the interest. After the final payment, the carrying amount on the note is zero, indicating that the note has been paid in full. Remember to review the reporting of current and long-term liabilities. c. How will the annual note payment be reported in the Year 1 income statement? Interest expense of $ 10,343 would be reported on the income statement.
Transcribed Image Text:Year 3 Dec. 31 Interest Expense Notes Payable Cash Year 4 Dec. 31 Interest Expense Notes Payable Cash Feedback 5,521 38,099 XX 43,620 X ▼ Check My Work The cash payment is the same in each year. The interest and principal repayment, however, change each year. This is because the carrying amount (book value) of the note decreases each year as principal is repaid, which decreases the interest. After the final payment, the carrying amount on the note is zero, indicating that the note has been paid in full. Remember to review the reporting of current and long-term liabilities. c. How will the annual note payment be reported in the Year 1 income statement? Interest expense of $ 10,343 would be reported on the income statement.
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