On January 1, 2015, Eagle borrows $35,000 cash by signing a four-year, 7% instal

Question

On January 1, 2015, Eagle borrows $35,000 cash by signing a four-year, 7% installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 2015 through 2018.(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, 2015, and the four payments from December 31, 2015, through December 31, 2018:

Eagle borrows $35,000 cash by signing a four-year, 7% installment note. Record the issuance of the note on January 1, 2015.

Record the payment of the first installment payment of interest and principal on December 31, 2015.

Record the payment of the second installment payment of interest and principal on December 31, 2016.

Record the payment of the third installment payment of interest and principal on December 31, 2017

Record the payment of the fourth installment payment of interest and principal on December 31, 2018. (Hint: Make sure that the balance in Notes payable is $0 after this entry.)

Explanation / Answer

amount of loan =$ 35,000

rate of interest = 7%

years =4

calculation of equal payment =r(p)/1-(1+r)-n

   = 0.07(35,000)/1-(1.07)-4

  =2450/1-0.76289

= 2450/0.2371

=$ 10,332.98

computation of repayment schdule

journal entries

being interest recognition and installments payments

particulars interest installment balance 1 st year end 35000*7/100=2450 10332.98 =35000+2450-10,332.98=27,112.02 2 nd year 27112.02*.07=1898.19 10332.98 =27112.02+1898.19-10,332.98=$18,682.22 3 rd year 18682.22*.07=1307.76 10332.98 =18682.22+1307.76-10332.98=9656.99 4 th year 9656.99*.07=675.98 10332.98 =9656.99+675.98-10332.98=0

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