Installment note Installment note is an obligation in which the defaulter needs to repay the investor total amount includes principal and interest on certain terms and conditions in a series of periodic payments. Effective interest rate of amortization bond Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate. To Prepare: The journal entry to lending the funds for the Company F as on January 1, 2018.

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Answer 1

Question

Chapter 14, Problem 14.19E

(1)

To determine

Installment note

Installment note is an obligation in which the defaulter needs to repay the investor total amount includes principal and interest on certain terms and conditions in a series of periodic payments.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The journal entry to lending the funds for the Company F as on January 1, 2018.

(2)

To determine

To Prepare: The amortization schedule for three year term of the installment note.

(3)

To determine

To prepare: The journal entry for the first installment payment on December 31, 2018.

(4)

To determine

To Prepare: The journal entry for the third installment payment on December 31, 2020.

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Problem 24Safari Bank granted a loan to a borrower on Jan. 1, 2020. The interest on the loan is 8% payable annually starting Dec. 31,2020. The loan matures in three years on Dec. 31,2022. Data related to the loan are:Principal amount 1,500,000Origination fees charged against the borrower 50,000Direct Origination cost incurred 130,150After consideration of the origination fees charged against the borrower and the direct origination cost incurred, the effective rate on the loan is 6%. Required:1. Compute the carrying amount of the loan receivable on December 31,2020, December 31,2021, December 31,2022.2. Prepare a table of amortization for the loan receivable.

Problem 24Safari Bank granted a loan to a borrower on Jan. 1, 2020. The interest on the loan is 8% payable annually starting Dec. 31,2020. The loan matures in three years on Dec. 31,2022. Data related to the loan are:Principal amount 1,500,000Origination fees charged against the borrower 50,000Direct Origination cost incurred 130,150After consideration of the origination fees charged against the borrower and the direct origination cost incurred, the effective rate on the loan is 6%. Required:1. Prepare a table of amortization for the loan receivable.2. Prepare the journal entries for 2020, 2021 and 2022.

Answer 2

Question

Chapter 14, Problem 14.19E

(1)

To determine

Installment note

Installment note is an obligation in which the defaulter needs to repay the investor total amount includes principal and interest on certain terms and conditions in a series of periodic payments.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The journal entry to lending the funds for the Company F as on January 1, 2018.

(2)

To determine

To Prepare: The amortization schedule for three year term of the installment note.

(3)

To determine

To prepare: The journal entry for the first installment payment on December 31, 2018.

(4)

To determine

To Prepare: The journal entry for the third installment payment on December 31, 2020.

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Answer 3

Question

Chapter 14, Problem 14.19E

(1)

To determine

Installment note

Installment note is an obligation in which the defaulter needs to repay the investor total amount includes principal and interest on certain terms and conditions in a series of periodic payments.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The journal entry to lending the funds for the Company F as on January 1, 2018.

(2)

To determine

To Prepare: The amortization schedule for three year term of the installment note.

(3)

To determine

To prepare: The journal entry for the first installment payment on December 31, 2018.

(4)

To determine

To Prepare: The journal entry for the third installment payment on December 31, 2020.

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Answer 4

Question

Chapter 14, Problem 14.19E

(1)

To determine

Installment note

Installment note is an obligation in which the defaulter needs to repay the investor total amount includes principal and interest on certain terms and conditions in a series of periodic payments.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The journal entry to lending the funds for the Company F as on January 1, 2018.

(2)

To determine

To Prepare: The amortization schedule for three year term of the installment note.

(3)

To determine

To prepare: The journal entry for the first installment payment on December 31, 2018.

(4)

To determine

To Prepare: The journal entry for the third installment payment on December 31, 2020.

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Answer 5

Chapter 14, Problem 14.19E

(1)

To determine

Installment note

Installment note is an obligation in which the defaulter needs to repay the investor total amount includes principal and interest on certain terms and conditions in a series of periodic payments.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The journal entry to lending the funds for the Company F as on January 1, 2018.

(2)

To determine

To Prepare: The amortization schedule for three year term of the installment note.

(3)

To determine

To prepare: The journal entry for the first installment payment on December 31, 2018.

(4)

To determine

To Prepare: The journal entry for the third installment payment on December 31, 2020.

Answer 6

Chapter 14, Problem 14.19E

(1)

To determine

Installment note

Installment note is an obligation in which the defaulter needs to repay the investor total amount includes principal and interest on certain terms and conditions in a series of periodic payments.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The journal entry to lending the funds for the Company F as on January 1, 2018.

Answer 7

Chapter 14, Problem 14.19E

(1)

To determine

Installment note

Installment note is an obligation in which the defaulter needs to repay the investor total amount includes principal and interest on certain terms and conditions in a series of periodic payments.

Effective interest rate of amortization bond

Effective interest rate method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the different amount of interest expense in each period of interest payment, but at a constant percentage rate.

To Prepare: The journal entry to lending the funds for the Company F as on January 1, 2018.

Answer 8

(2)

To determine

To Prepare: The amortization schedule for three year term of the installment note.

Answer 9

(2)

To determine

To Prepare: The amortization schedule for three year term of the installment note.

Answer 10

(3)

To determine

To prepare: The journal entry for the first installment payment on December 31, 2018.

Answer 11

(3)

To determine

To prepare: The journal entry for the first installment payment on December 31, 2018.

Answer 12

(4)

To determine

To Prepare: The journal entry for the third installment payment on December 31, 2020.

Answer 13

(4)

To determine

To Prepare: The journal entry for the third installment payment on December 31, 2020.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - On January 1, 2018, Brandon Electronics issued 85...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8Q Ch. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10Q

Solution Summary: The author explains that an installment note is an obligation in which the defaulter repays the investor total amount including principal and interest in a series of periodic payments.

To Prepare: The amortization schedule for three year term of the installment note.

To prepare: The journal entry for the first installment payment on December 31, 2018.

To Prepare: The journal entry for the third installment payment on December 31, 2020.

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Chapter 14 Solutions