On November 1, 2017, Norwood borrows $600,000 cash from a bank by signing a five

Question

On November 1, 2017, Norwood borrows $600,000 cash from a bank by signing a five-year installment note bearing 8% interest. The note requires equal payments of $150,274 each year on October 31. eTableBIS Table B.2, TableB.3, and Table B-9 (Use appropriate factor(s) from the tables provided.) Required: 1. Complete an amortization table for this installment note. 2. Prepare the journal entries in which Norwood records the following (a) Accrued interest as of December 31, 2017 (the end of its annual reporting period). (b) The first annual payment on the note.

Explanation / Answer

SOLUTION

(A) Amortization table

Debit notes payable($)(C=D-B)

Period ending date Beginning balance ($) (A) Debit interest expense ($)(B=A*8%)

Debit notes payable($)(C=D-B)

Credit cash ($)(D) Ending balance ($)(E=A-C) 10/31/2018 600,000 48,000 102,274 150,274 497,726 10/31/2019 497,726 39,818 110,456 150,274 387,270 10/31/2020 387,270 30,982 119,292 150,274 267,978 10/31/2021 267,978 21,438 128,836 150,274 139,142 10/31/2022 139,142 11,132 139,142 150,274 0 Total 151,370 600,000 751,370

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