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Recording Entries for an Installment Note Payable On January 1 of Year 1, a borrower signed a long-term note, face amount of $440,000; time to maturity is three years; stated rate of 8%. The market rate is 10%. The note will be paid in three equal annual installments $170,733 on each December 31 (which is the accounting year-end for the borrower). Required Note: Round your answer to the nearest whole dollar. a. Compute the cash received by the borrower. $ 424,579 x b. Prepare a debt amortization schedule. Note: Round each amount in the table to the nearest whole dollar. Note: Use a negative sign for the "Reduction in N.P." amounts. Date Jan. 1, Year 1 Dec. 31, Year 1 $ Dec. 31, Year 2 $ Dec. 31, Year 3 $ Total $ Cash 170,733 $ 170,733 $ 170,733 $ 512,199 $ Interest Expense Reduction in N.P. 42,458 $ 29,630 $ 15,521 $ 87,609 $ $ 128,275 * $ 141,104 x $ 155,212 * $ 424,591 Carrying Value 424,579 x 296,304 x 155,212 ✓ 310,424

Recording Entries for an Installment Note Payable On January 1 of Year 1, a borrower signed a long-term note, face amount of $440,000; time to maturity is three years; stated rate of 8%. The market rate is 10%. The note will be paid in three equal annual installments $170,733 on each December 31 (which is the accounting year-end for the borrower). Required Note: Round your answer to the nearest whole dollar. a. Compute the cash received by the borrower. $ 424,579 x b. Prepare a debt amortization schedule. Note: Round each amount in the table to the nearest whole dollar. Note: Use a negative sign for the "Reduction in N.P." amounts. Date Jan. 1, Year 1 Dec. 31, Year 1 $ Dec. 31, Year 2 $ Dec. 31, Year 3 $ Total $ Cash 170,733 $ 170,733 $ 170,733 $ 512,199 $ Interest Expense Reduction in N.P. 42,458 $ 29,630 $ 15,521 $ 87,609 $ $ 128,275 * $ 141,104 x $ 155,212 * $ 424,591 Carrying Value 424,579 x 296,304 x 155,212 ✓ 310,424

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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Recording Entries for an Installment Note Payable On January 1 of Year 1, a borrower signed a long-term note, face amount of $440,000; time to maturity is three years; stated rate of 8%. The market rate is 10%. The note will be paid in three equal annual installments of $170,733 on each December 31 (which is the accounting year-end for the borrower). Required Note: Round your answer to the nearest whole dollar. a. Compute the cash received by the borrower. $ 424,579 * b. Prepare a debt amortization schedule. Note: Round each amount in the table to the nearest whole dollar. Note: Use a negative sign for the "Reduction in N.P." amounts. Date Jan. 1, Year 1 Dec. 31, Year 1 $ Dec. 31, Year 2 $ Dec. 31, Year 3 $ Total $ Cash 170,733 ✓ $ 170,733 $ 170,733 ✓ $ 512,199 $ Interest Expense Reduction in N.P. 42,458 ✔ $ 29,630 $ 15,521✔ $ 87,609 $ $ 128,275 * $ 141,104 x $ 155,212 * $ 424,591 Carrying Value 424,579 * 296,304 * 155,212 ✔ 310,424
Transcribed Image Text:Recording Entries for an Installment Note Payable On January 1 of Year 1, a borrower signed a long-term note, face amount of $440,000; time to maturity is three years; stated rate of 8%. The market rate is 10%. The note will be paid in three equal annual installments of $170,733 on each December 31 (which is the accounting year-end for the borrower). Required Note: Round your answer to the nearest whole dollar. a. Compute the cash received by the borrower. $ 424,579 * b. Prepare a debt amortization schedule. Note: Round each amount in the table to the nearest whole dollar. Note: Use a negative sign for the "Reduction in N.P." amounts. Date Jan. 1, Year 1 Dec. 31, Year 1 $ Dec. 31, Year 2 $ Dec. 31, Year 3 $ Total $ Cash 170,733 ✓ $ 170,733 $ 170,733 ✓ $ 512,199 $ Interest Expense Reduction in N.P. 42,458 ✔ $ 29,630 $ 15,521✔ $ 87,609 $ $ 128,275 * $ 141,104 x $ 155,212 * $ 424,591 Carrying Value 424,579 * 296,304 * 155,212 ✔ 310,424
c. Provide the required entries for the borrower for the issuance of the note on January 1, Year 1, and the interest payments on December 31 of Year 1, Year 2, and Year 3. Note: Round your answer to the nearest whole dollar. Date Jan. 1, Year 1 Cash Note Payable To record issuance of note. Dec. 31, Year 1 Interest Expense Account Name Premium on Bonds Payable Cash To record interest payment. Dec. 31, Year 2 Interest Expense Premium on Bonds Payable Cash To record interest payment. Dec. 31, Year 3 Interest Expense Premium on Bonds Payable Cash To record interest payment. V Dr. 440,000 0 42,458 0 0 29,630 141,103 0 15,521 155,212 0 Cr. 0 x 440,000 * 0✔ 128,275 * 170,733 ✓ 0♥ 0 x 170,733 ✔ 0✔ 0 x 170,733 ✔
Transcribed Image Text:c. Provide the required entries for the borrower for the issuance of the note on January 1, Year 1, and the interest payments on December 31 of Year 1, Year 2, and Year 3. Note: Round your answer to the nearest whole dollar. Date Jan. 1, Year 1 Cash Note Payable To record issuance of note. Dec. 31, Year 1 Interest Expense Account Name Premium on Bonds Payable Cash To record interest payment. Dec. 31, Year 2 Interest Expense Premium on Bonds Payable Cash To record interest payment. Dec. 31, Year 3 Interest Expense Premium on Bonds Payable Cash To record interest payment. V Dr. 440,000 0 42,458 0 0 29,630 141,103 0 15,521 155,212 0 Cr. 0 x 440,000 * 0✔ 128,275 * 170,733 ✓ 0♥ 0 x 170,733 ✔ 0✔ 0 x 170,733 ✔
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