Magic Finger Problem Information: Magic Fingers Massage Parlor, Inc. agrees to a loan with the following terms on January 1, 2018. 1) 3 year life, has a stated rate of 16%, and pays interest semiannually. 2) The initial amount borrowed was $12,000. Calculation of Payments: Partial Repayment Schedule (Just the first 4 periods) Cash Interest Expense Principal Reduction Carrying Value Payment Date 1/1/2018 6/30/2018 START Period # 1 Period 2 Period # 3 Period # 4 12/31/2019 1/1/2019 6/30/2019
Magic Finger Problem Information: Magic Fingers Massage Parlor, Inc. agrees to a loan with the following terms on January 1, 2018. 1) 3 year life, has a stated rate of 16%, and pays interest semiannually. 2) The initial amount borrowed was $12,000. Calculation of Payments: Partial Repayment Schedule (Just the first 4 periods) Cash Interest Expense Principal Reduction Carrying Value Payment Date 1/1/2018 6/30/2018 START Period # 1 Period 2 Period # 3 Period # 4 12/31/2019 1/1/2019 6/30/2019
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:### Educational Content on Loan Payments and Financial Terms
#### Recording Interest Payments
**Table: Interest Payment Recording**
This section requires the recording of interest payments in a tabulated format with columns for account name, debit, and credit. It's essential for tracking and accounting purposes.
| Account Name | Debit | Credit |
|---------------|-------|--------|
| | | |
| | | |
| | | |
---
#### Magic Finger Problem Information
**Scenario:**
Magic Fingers Massage Parlor, Inc. has agreed to a loan with the following terms starting on January 1, 2018:
1. The loan has a 3-year life with a stated interest rate of 16% and pays interest semiannually.
2. The initial amount borrowed is $12,000.
**Calculation of Payments:**
**Partial Repayment Schedule (First 4 periods):**
This table outlines the initial date of the loan and the subsequent dates for the first four periods, detailing cash payments, interest expenses, principal reductions, and carrying values.
**Table: Repayment Schedule**
| Date | Cash Payment | Interest Expense | Principal Reduction | Carrying Value |
|------------|---------------|------------------|---------------------|----------------|
| START | 1/1/2018 | | | |
| Period #1 | 6/30/2018 | | | |
| Period #2 | 1/1/2019 | | | |
| Period #3 | 6/30/2019 | | | |
| Period #4 | 12/31/2019 | | | |
---
This content is designed to help users understand the importance of proper accounting entries for interest payments and provides a practical example of a loan repayment schedule. These concepts are vital for financial management and planning.
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