Question

In: Accounting

Zetix borrowed $20,000 on a one-year, 10 percent note payable from the local bank on March...

Zetix borrowed $20,000 on a one-year, 10 percent note payable from the local bank on March 1. Interest was paid quarterly, and the note was repaid one year from the time the money was borrowed.

Requirements

Calculate the amount of cash payments Zetix was required to make in each of the two calendar years that were affected by the note payable assuming accounting period ends on Dec. 31 each year.

Solutions

Expert Solution

1st Calendar Year
Amount $
Interest from March to May            500 =20000*10%*3/12
Interest from June to August            500 =20000*10%*3/12
Interest from September to November            500 =20000*10%*3/12
Total cash Payments         1,500
2nd Calender Year
Amount $
Interest from December year 1 to February Year 2            500 =20000*10%*3/12
Principal Repayment 20,000
Total cash Payments 20,500

ekkarill92 answered 2 years ago
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