The following amortization schedule indicates the interest and principal to be r

Question

The following amortization schedule indicates the interest and principal to be repaid on an installment note established January 1, 2015, for a company with a March 31 year-end Ending Interest Expense 1,500 1,152 787 403 Repaid Principal on Note Payable Note Payable Beginning Note Year Payable 6,960 7,308 7,674 8,058 23,040 15,732 8,058 30,000 2 3 4 23,040 15,732 8,058 Total 3,842 30,000 Required 1. Assuming the company makes the required annual payments on December 31, use the amortization schedule to determine (a) the amount of the (rounded) annual payment, (b) the amount of Interest Expense to report in the year ended March 31, 2015, (c) the amount of Interest Expense to report in the year ended March 31, 2016, (d) the Note Payable balance at January 1, 2018, and (e) the total interest and total principal paid over the note's entire life. (Round your answers to the nearest whole dollar amount.) (a) Annual Payment (b) Interest Expense March 31, 2015 (c) Interest Expense March 31, 2016 (d) Note Payable January 1, 2018 (e) Total Interest (e)-1 Total Principal

Explanation / Answer

a) Annual payment = Principal+Interest expense = 1,500+6,960 = 8,460 (same for all the four years)

b) Interest expense for the year ended March 31, 2015 = 1,500*3/12 = 3758#

c) Interest expense for the year ended March 31, 2016 = (1,500*9/12)+(1,15*3/12) = 1,125+288 = 1,413#

(# As the annual payments are paid on December 31 of each year and interest shown in the above amortization table is from January 1 to December 31 of every year)

d) Note Payable on January 1, 2018 is beginning balance of note payable in year 4 (i.e. 8,058)

e) Total Interest over the note's entire life = 3,842 (as per amortization table)

e-1) Total Principal = 30,000 (as per amortization table)

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