On January 1, 2018 Kimmel Company accepts a $53000 non interest bearing note from a customer...

On January 1, 2018 Kimmel Company accepts a $53000 non interest bearing note from a customer for services provided. The note is to be paid in 4 equal installments every 6 months (payments every July 1 and January 1 with the first payment on July 1, 2018) An assumed interest rate of 9% is implied. Round installments to the nearest dollar.

A) Prepare an amortization table for this note. Round amounts to the nearest dollar. Clearly label your rows with dates for each recognition of interest revenue/discount amortization and for each installment payment. NOTE: Kimmel Corp prepares financial statements (and recognizes interest revenue) semiannually on each June 30th and December 31st.

B) Prepaire T Accounts for note receivable and discount on notes receivable witha ll entries posted from 1/1/18 to 12/31/18

C) How much interest revenue would be on the income statement for the year ended December 31,2018?

Expert Solution

1-	value of sales	Using present value function in MS excel	PV(4.5%,4,0,53000,0)	($44,444)

2-	Period	balance	premium amortized = beginning balance*9%/2	balance in premium account = balance-premium amortized	carrying value = beginning balance+premium amortized
	0			8556	44444
	1	44444	1999.98	6556.02	46443.98
	2	46443.98	2089.9791	4466.0409	48533.9591
	3	48533.96	2184.02816	2282.012741	50717.9873
	4	50717.99	2282.309427	-0.296686177	53000.2967

3-		T- Account
		Accounts receivables
1-Jan	sales revenue	44444	31-Dec	balance	44444

		premium on notes payable
30-Jun	interest income	1999.98	1-Jan	notes receivables	8556
31-Dec	interest income	2089.979
31-Dec	balance	4466.041

		interest revenue
31-Dec	balance	4089.959	30-Jun	premium on notes payable	1999.98
			31-Dec	premium on notes payable	2089.9791

4-	total interest revenue for 2018		4089.9591

ekkarill92 answered 2 years ago

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