On January 1, 2017, Eagle borrows $22,000 cash by signing a four-year, 6% instal
ID: 2395131 • Letter: O
Question
On January 1, 2017, Eagle borrows $22,000 cash by signing a four-year, 6% installment note. The note requires four equal payments of $6,349, consisting of accrued interest and principal on December 31 of each year from 2017 through 2020. (Table B.1. Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations and final answers to the nearest dollar amount. Round all table values to 4 decimal places, and use the rounded table values in calculations.) Prepare the journal entries for Eagle to record the loan on January 1, 2017, and the four payments from December 31, 2017, through December 31, 2020.Explanation / Answer
Answers
---Note: “Appropriate Factor table not provided”, rounding off difference may arise. Process is explained below though.
Beginning Balance - Principal
Installment paid in cash
Interest Expense
Reduction In Principal
Ending Balance - Principal
[A]
[B = given]
[C = A x 6%]
[D = B – C]
[E = A – D]
Jan 1 2017
$ 22,000.00
31-Dec-17
$ 22,000.00
$ 6,349.00
$ 1,320.00
$ 5,029.00
$ 16,971.00
31-Dec-18
$ 16,971.00
$ 6,349.00
$ 1,018.00
$ 5,331.00
$ 11,640.00
31-Dec-19
$ 11,640.00
$ 6,349.00
$ 698.00
$ 5,651.00
$ 5,989.00
31-Dec-20
$ 5,989.00
$ 6,349.00
$ 360.00
$ 5,989.00
$ -
Date
Accounts title
Debit
Credit
01-Jan-17
Cash
$ 22,000.00
Notes Payable
22000
(notes payable issued)
31-Dec-17
Notes Payable
$ 5,029.00
Interest expense
$ 1,320.00
Cash
$ 6,349.00
(1st installment paid)
31-Dec-18
Notes Payable
$ 5,331.00
Interest expense
$ 1,018.00
Cash
$ 6,349.00
(2nd installment paid)
31-Dec-19
Notes Payable
$ 5,651.00
Interest expense
$ 698.00
Cash
$ 6,349.00
(3rd installment paid)
31-Dec-20
Notes Payable
$ 5,989.00
Interest expense
$ 360.00
Cash
$ 6,349.00
(4th installment paid)
Beginning Balance - Principal
Installment paid in cash
Interest Expense
Reduction In Principal
Ending Balance - Principal
[A]
[B = given]
[C = A x 6%]
[D = B – C]
[E = A – D]
Jan 1 2017
$ 22,000.00
31-Dec-17
$ 22,000.00
$ 6,349.00
$ 1,320.00
$ 5,029.00
$ 16,971.00
31-Dec-18
$ 16,971.00
$ 6,349.00
$ 1,018.00
$ 5,331.00
$ 11,640.00
31-Dec-19
$ 11,640.00
$ 6,349.00
$ 698.00
$ 5,651.00
$ 5,989.00
31-Dec-20
$ 5,989.00
$ 6,349.00
$ 360.00
$ 5,989.00
$ -
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