Homeland Plus specializes in home goods and accessories. In order for the company to expand its business, the company takes out a long-term loan in the amount of $690,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 8.70%. Each year on December 31, the company pays down the principal balance by $83,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year.A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest.$fill in the blankB. Compute the interest accrued on December 31 of the first year.$fill in the blankC. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year. If an amount box does not require an entry, leave it blank.Dec. 31 fill in the blankfill in the blank fill in the blankfill in the blank Homeland Plus specializes in home goods and accessories. In order for the company to expand itsbusiness, the company takes out a long-term loan in the amount of $690,000. Assume that any loansare created on January 1. The terms of the loan include a periodic payment plan, where interestpayments are accumulated each year but are only computed against the outstanding principal balanceduring that current period. The annual interest rate is 8.70%. Each year on December 31, the companypays down the principal balance by $83,000. This payment is considered part of the outstandingprincipal balance when computing the interest accumulation that also occurs on December 31 of thatyear.A. Determine the outstanding principal balance on December 31 of the first year that is computed forinterest.B. Compute the interest accrued on December 31 of the first year.$C. Make a journal entry to record interest accumulated during the first year, but not paid as ofDecember 31 of that first year. If an amount box does not require an entry, leave it blank.Dec. 31

Solution to A Outstanding principal balance on December 31 of the first year that is computed for interest is $ 690,000. Explanation Principal amount is the amount borrowed.Outstanding Principal means Amount of money borrowed less amount repaid. Here ,on December 31 yet no interest payment or principal payment is yet made ,hence outstanding principal to compute the interest will be equal to the amount of long term loan borrowed on January 1. Solution to B Interest Accrued on December 31 of the first year is $ 60,030. Calculation : Interest Accrued = Principal amount outstanding on Dec 31 of first year x Annual interest rate = $690,000 x 8.70% = $60,030 Explanation Interest at year end is calculated on outstanding amount of principal at given annual interest rate. Solution to C Journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year. Date Accounts Debit $ Credit $ Dec ,31 Interest Expense $ 60,030 Interest Payable $ 60,030 ( To record interest accrued at 8.70 % on principal amount.) Explanation : Interest Accrued is the interest amount incurred but not yet paid. As per debit credit rule of accounting Interest Expense is expense account ,when expense is incurred/increased is recorded as Debit and Interest Payable is liability account when liability increases is recorded as Credit.

Answered: Homeland Plus specializes in home goods…

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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Homeland Plus specializes in home goods and accessories. In order for the company to expand its business, the company takes out a long-term loan in the amount of $690,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 8.70%. Each year on December 31, the company pays down the principal balance by $83,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year.

A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest.

$fill in the blank

B. Compute the interest accrued on December 31 of the first year.

$fill in the blank

C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year. If an amount box does not require an entry, leave it blank.

Dec. 31		fill in the blank	fill in the blank
		fill in the blank	fill in the blank

Homeland Plus specializes in home goods and accessories. In order for the company to expand its
business, the company takes out a long-term loan in the amount of $690,000. Assume that any loans
are created on January 1. The terms of the loan include a periodic payment plan, where interest
payments are accumulated each year but are only computed against the outstanding principal balance
during that current period. The annual interest rate is 8.70%. Each year on December 31, the company
pays down the principal balance by $83,000. This payment is considered part of the outstanding
principal balance when computing the interest accumulation that also occurs on December 31 of that
year.
A. Determine the outstanding principal balance on December 31 of the first year that is computed for
interest.
B. Compute the interest accrued on December 31 of the first year.
$
C. Make a journal entry to record interest accumulated during the first year, but not paid as of
December 31 of that first year. If an amount box does not require an entry, leave it blank.
Dec. 31

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