In: Accounting
On 1/1/20, you purchase a new car for $20,000 with a 12% loan (note) payable monthly. Payments of principal and interest are made at the end of each month for the next 30 months.
Solution:
Monthly interest rate = 12% / 12 = 1%
Nos of periods = 30
Monthly installment = $20,000 / Cumulative PV factor at 1% for 30 periods
= $20,000 / 25.80771 = $774.96
Payment No | Payment Date | Beginning carrying value | Effective interest rate | Interest expense | Cash (Principal and interest paid) | Note payable (Reduction of Principal) | Ending Carrying value |
1 | 31-Jan-20 | $20,000.00 | 1% | $200.00 | $774.96 | $574.96 | $19,425.04 |
2 | 29-Feb-20 | $19,425.04 | 1% | $194.25 | $774.96 | $580.71 | $18,844.33 |
3 | 31-Mar-20 | $18,844.33 | 1% | $188.44 | $774.96 | $586.52 | $18,257.81 |
4 | 30-Apr-20 | $18,257.81 | 1% | $182.58 | $774.96 | $592.38 | $17,665.43 |
5 | 31-May-20 | $17,665.43 | 1% | $176.65 | $774.96 | $598.31 | $17,067.13 |
6 | 30-Jun-20 | $17,067.13 | 1% | $170.67 | $774.96 | $604.29 | $16,462.84 |
7 | 31-Jul-20 | $16,462.84 | 1% | $164.63 | $774.96 | $610.33 | $15,852.51 |
8 | 31-Aug-20 | $15,852.51 | 1% | $158.53 | $774.96 | $616.43 | $15,236.07 |
9 | 30-Sep-20 | $15,236.07 | 1% | $152.36 | $774.96 | $622.60 | $14,613.47 |
10 | 31-Oct-20 | $14,613.47 | 1% | $146.13 | $774.96 | $628.83 | $13,984.65 |
11 | 30-Nov-20 | $13,984.65 | 1% | $139.85 | $774.96 | $635.11 | $13,349.53 |
12 | 31-Dec-20 | $13,349.53 | 1% | $133.50 | $774.96 | $641.46 | $12,708.07 |
13 | 31-Jan-21 | $12,708.07 | 1% | $127.08 | $774.96 | $647.88 | $12,060.19 |
14 | 28-Feb-21 | $12,060.19 | 1% | $120.60 | $774.96 | $654.36 | $11,405.83 |
15 | 31-Mar-21 | $11,405.83 | 1% | $114.06 | $774.96 | $660.90 | $10,744.93 |
16 | 30-Apr-21 | $10,744.93 | 1% | $107.45 | $774.96 | $667.51 | $10,077.42 |
17 | 31-May-21 | $10,077.42 | 1% | $100.77 | $774.96 | $674.19 | $9,403.23 |
18 | 30-Jun-21 | $9,403.23 | 1% | $94.03 | $774.96 | $680.93 | $8,722.30 |
19 | 31-Jul-21 | $8,722.30 | 1% | $87.22 | $774.96 | $687.74 | $8,034.57 |
20 | 31-Aug-21 | $8,034.57 | 1% | $80.35 | $774.96 | $694.61 | $7,339.95 |
21 | 30-Sep-21 | $7,339.95 | 1% | $73.40 | $774.96 | $701.56 | $6,638.39 |
22 | 31-Oct-21 | $6,638.39 | 1% | $66.38 | $774.96 | $708.58 | $5,929.82 |
23 | 30-Nov-21 | $5,929.82 | 1% | $59.30 | $774.96 | $715.66 | $5,214.16 |
24 | 31-Dec-21 | $5,214.16 | 1% | $52.14 | $774.96 | $722.82 | $4,491.34 |
25 | 31-Jan-22 | $4,491.34 | 1% | $44.91 | $774.96 | $730.05 | $3,761.29 |
26 | 28-Feb-22 | $3,761.29 | 1% | $37.61 | $774.96 | $737.35 | $3,023.94 |
27 | 31-Mar-22 | $3,023.94 | 1% | $30.24 | $774.96 | $744.72 | $2,279.22 |
28 | 30-Apr-22 | $2,279.22 | 1% | $22.79 | $774.96 | $752.17 | $1,527.05 |
29 | 31-May-22 | $1,527.05 | 1% | $15.27 | $774.96 | $759.69 | $767.37 |
30 | 30-Jun-22 | $767.37 | 1% | $7.59 | $774.96 | $767.37 | $0.00 |