Question

In: Accounting

On January 1, Year 1, Beatie Co. borrowed $240,000 cash from Central Bank by issuing a...

On January 1, Year 1, Beatie Co. borrowed $240,000 cash from Central Bank by issuing a five-year, 6 percent note. The principal and interest are to be paid by making annual payments in the amount of $56,975. Payments are to be made December 31 of each year, beginning December 31, Year 1.

a) Required Prepare an amortization schedule for the interest and principal payments for the five-year period.

Solutions

Expert Solution

Amortization Schedule:
Year Beginning Notes Payable Interest Expense Annual Payment Reduction of principal Ending Notes Payable
a b=a*6% c d=c-b e=a-d
1 $ 2,40,000.00 $ 14,400.00 $ 56,975.00 $ 42,575.00 $ 1,97,425.00
2 $ 1,97,425.00 $ 11,845.50 $ 56,975.00 $ 45,129.50 $ 1,52,295.50
3 $ 1,52,295.50 $   9,137.73 $ 56,975.00 $ 47,837.27 $ 1,04,458.23
4 $ 1,04,458.23 $   6,267.49 $ 56,975.00 $ 50,707.51 $     53,750.72
5 $     53,750.72 $   3,224.27 $ 56,975.00 $ 53,750.73 $              -0.00
Note:
In the year 5, $ 0.77 is adjusted in interest expense.

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