On January 1, 2019, ABC Company borrowed $120,000 from the bank. The loanis a 7-year...

On January 1, 2019, ABC Company borrowed $120,000 from the bank. The loan
is a 7-year note payable that requires annual payments of $24,500 every
December 31, beginning December 31, 2019. Assume the loan has an interest
rate of 10% compounded annually.

Calculate the amount of the note payable at December 31, 2020 that wouldbe classified as a current liability.

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Expert Solution

ANSWER

Amount of principal Payable during next one year is classified as current liability
	Amount of PRINCIPAL due within one year=Current Liability
	REPAYMENT SCHEDULE
		A	B	C=A*10%	D=B-C	E=A-D
	Year	Beginning Balance	Annual Total Payment	Interest	Principal	Ending Balance
	2019	$120,000	$24,500	$12,000	$12,500	$107,500
	2020	$107,500	$24,500	$10,750	$13,750	$93,750
	2021	$93,750	$24,500	$9,375	$15,125	$78,625
	2022	$78,625	$24,500	$7,863	$16,638	$61,988
	2023	$61,988	$24,500	$6,199	$18,301	$43,686
	2024	$43,686	$24,500	$4,369	$20,131	$23,555
	2025	$23,555	$24,500	$2,355	$22,145	$1,410

	Loan Balance as on December 31, 2020	$93,750
	Principal Payable within next one year(by December 31,2021)	$15,125
	Classified as current liability on December 31, 2020	$15,125

ekkarill92 answered 1 year ago

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