On December 31, 2020, Stellar Company signed a $ 1,022,000 note to Pearl Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Stellar’s financial situation worsened. On December 31, 2022, Pearl Bank determined that it was probable that the company would pay back only $ 613,200 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $ 1,022,000 loan.
On December 31, 2020, Stellar Company signed a $ 1,022,000 note to Pearl Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Stellar’s financial situation worsened. On December 31, 2022, Pearl Bank determined that it was probable that the company would pay back only $ 613,200 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $ 1,022,000 loan.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On December 31, 2020, Stellar Company signed a $ 1,022,000 note to Pearl Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Stellar’s financial situation worsened. On December 31, 2022, Pearl Bank determined that it was probable that the company would pay back only $ 613,200 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $ 1,022,000 loan.
Transcribed Image Text:Prepare a note amortization schedule for Pearl Bank up to December 31, 2022. (Round answers to O decimal places, e.g. 5,275.)
Note Amortization Schedule
(Before Impairment)
Increase in
Carrying
Cash
Interest
Carrying
Amount of
Received
Revenue
Amount
Note
$4
946,454
91980
104110
12,130
958,584
91980
105444
13,464
%24
%24
%24
%24
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