Problem 10-26A Effect of an installment note on financial statements [LO 1] On J

Question

Problem 10-26A Effect of an installment note on financial statements [LO 1]

On January 1, 2013, Mixon Co. borrowed cash from First City Bank by issuing a $90,000 face value, three-year term note that had a 7 percent annual interest rate. The note is to be repaid by making annual payments of $34,295 that include both interest and principal on December 31. Mixon invested the proceeds from the loan in land that generated lease revenues of $45,000 cash per year.

Prepare an amortization schedule for the three-year period. (Round your answers to the nearest dollar amount. Leave no cells blank - be certain to enter "0" wherever required. Apply an amount of principal that results in Net Liability equal "0" in the last period.)

On January 1, 2013, Mixon Co. borrowed cash from First City Bank by issuing a $90,000 face value, three-year term note that had a 7 percent annual interest rate. The note is to be repaid by making annual payments of $34,295 that include both interest and principal on December 31. Mixon invested the proceeds from the loan in land that generated lease revenues of $45,000 cash per year.

Explanation / Answer

MIXON CO. Amortization Schedule $90,000, 3-Yr. Term Note, 7% Interest Rate Year Prin. Bal. Cash Pay. Applied to Applied to Prin. Bal. on Jan 1 Dec. 31 Interest Principal End of Period 2013 $ 90,000.00 $ 34,295.00 $ 6,300.00 $ 27,995.00 $   62,005.00 2014 $ 62,005.00 $ 34,295.00 $ 4,340.00 $ 29,955.00 $   32,050.00 2015 $ 32,050.00 $ 34,295.00 $ 2,245.00 $ 32,050.00 $                  -

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