Question

Great Adventures Problem 9-1 Tony’s favorite memories of his childhood were the times he spent with his dad at camp. Tony was daydreaming of those days a bit as he and Suzie jogged along a nature trail and came across a wonderful piece of property for sale. He turned to Suzie and said, “I’ve always wanted to start a camp where families could get away and spend some quality time together. If we just had the money, I know this would be the perfect place.” They called several banks and on January 1, 2020, Great Adventures obtained a $560,000, 6%, 10-year installment loan from Summit Bank. Payments of $6,217 are required at the end of each month over the life of the 10-year loan. Each monthly payment of $6,217 includes both interest expense and principal payments (i.e., reduction of the loan amount). Late that night Tony exclaimed, “$560,000 for our new camp, this has to be the best news ever.” Suzie snuggled close and said, “There’s something else I need to tell you, Tony, I’m expecting!” They decided right then, if it was a boy, they would name him Venture. Required: 1. Complete the first three rows of an amortization table.

2. Record the note payable on January 1, 2020, and the first two payments on January 31, 2020, and February 28, 2020. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Record the issuance of note payable.

Record the monthly payment.

Answer 1

Solution:
1.	First three rows of an amortization table
A	B	C	D	E
Date	Cash Paid	Interest Expense	Decrease in Carrying Value	Carrying Value
	[Monthly payment at month End]	Carrying Value x Market Rate	[B - C]	[Prior Carrying Value - D]
1/1/2020				$560,000
1/31/2020	$6,217	$2,800	$3,417	$556,583
2/28/2020	$6,217	$2,783	$3,434	$553,149
Working Notes:
A	B	C	D	E
Date	Cash Paid	Interest Expense	Decrease in Carrying Value	Carrying Value
	[Monthly payment at month End]	Carrying Value x Market Rate	[B - C]	[Prior Carrying Value - D]
1/1/2020				$560,000
1/31/2020	$6,217	$2,800	$3,417	$556,583
		[560,000 x 6%x(1/12)]	[$6,217 -$2,800]	[560,000 -3,417]
2/28/2020	$6,217	$2,783	$3,434	$553,149
		[553,149 x 6%x(1/12)]	[$6,217 -$2,783]	[556,583-3,434]
2.
Date	General Journal	Debit	Credit
January 1, 2020	Cash	560,000
	Notes Payable		560,000
January 31, 2020	Interest Expense	2,800
	Notes Payable	3,417
	Cash		6,217
February 28, 2020	Interest Expense	2,783
	Notes Payable	3,434
	Cash		6,217
Notes:	All amount taken from above table and computation can be refer from above working notes.
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