Question

Period Ending Date	(A) Beginning Balance [Prior (E)]	(B) Debit Interest Expense [7% x (A)]	(C) Debit Notes Payable [(D) - (B)]	(D) Credit Cash [computed]	(E) Ending Balance [(A) - (C)]
2015	$100,000	$7,000	$22,523	$29,523	$77,477
2016
2017
2018
		$18,092	$100,000	$118,092

P2. On January 1, 2015 Tommy Inc. borrows $100,000 cash by signing a four-year, 7% installment note. The note requires four equal payments of $29,523 of accrued interest and principal on December 31 of each year for the next four years. The first payment is due Dec 31, 2015.

Part 1. Prepare the amortization table for this installment note using the template below. Note that I completed the first line for you and left the totals as check figures.

1.    Amortization table for the loan

*Adjusted for rounding.

Part 2. Prepare the journal entries for Tommy, Inc to record the loan on January 1, 2015 and the four payments from Dec 31, 2015 through Dec 31, 2018.

Date                            Account Name                                    Debit               Credit

Answer 1

1. Amortization table for this installment note using the template below is as prepared below:

Period Ending	(A)	(B)	(C)	(D)	(E)
Date	Beginning Balance [Prior (E)]	Debit Interest Expense [7% x (A)]	Debit Notes Payable [(D) - (B)]	Credit	Ending Balance [(A) - (C)]
				Cash
				[computed]
2015	$ 100,000	$ 7,000	$ 22,523	$ 29,523	$ 77,477
2016	$ 77,477	$ 5,423	$ 24,100	$ 29,523	$ 53,377
2017	$ 53,377	$ 3,736	$ 25,787	$ 29,523	$ 27,591
2018	$ 27,591	$ 1,931	$ 27,591	$ 29,523	$ 0
		$ 18,091	$ 100,000	$ 118,092

Journal entries are as prepared below:

Year	Particulars	L.F	Debit ($)	Credit ($)
2015
Jan-01	Cash		100,000
	Loan payable			100,000
	(for loan borrowed)
Dec-31	Interest Expense		$ 7,000
	Loan payable		$ 22,523
	Cash			$ 29,523
	(for interest and principal paid)
2016
Dec-31	Interest Expense		$ 5,423
	Loan payable		$ 24,100
	Cash			$ 29,523
	(for interest and principal paid)
2017
Dec-31	Interest Expense		$ 3,736
	Loan payable		$ 25,787
	Cash			$ 29,523
	(for interest and principal paid)
2018
Dec-31	Interest Expense		$ 1,931
	Loan payable		$ 27,591
	Cash			$ 29,522
	(for interest and principal paid)