Question
In: Accounting
On January 1, Year 1, Bryson Company obtained a $39,000, four-year, 10% installment note from Campbell...
On January 1, Year 1, Bryson Company obtained a $39,000, four-year, 10% installment note from Campbell Bank. The note requires annual payments of $12,303, beginning on December 31, Year 1.
a. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4.
Note: Round the computation of the interest expense to the nearest whole dollar. Enter all amounts as positive numbers. In Year 4, round the amount in the Decrease in Notes Payable column either up or down to ensure that the Carrying Amount zeroes out.
| Amortization of Installment Notes | ||||||||||||||||||||
| Year Ending December 31 |
January 1 Carrying Amount |
Note Payment (Cash Paid) |
Interest Expense (10% of January 1 Note Carrying Amount) |
Decrease in Notes Payable |
December 31 Carrying Amount |
|||||||||||||||
| Year 1 | $fill in the blank 5cffd20c4f9cfe8_1 | $fill in the blank 5cffd20c4f9cfe8_2 | $fill in the blank 5cffd20c4f9cfe8_3 | $fill in the blank 5cffd20c4f9cfe8_4 | $fill in the blank 5cffd20c4f9cfe8_5 | |||||||||||||||
| Year 2 | fill in the blank 5cffd20c4f9cfe8_6 | fill in the blank 5cffd20c4f9cfe8_7 | fill in the blank 5cffd20c4f9cfe8_8 | fill in the blank 5cffd20c4f9cfe8_9 | fill in the blank 5cffd20c4f9cfe8_10 | |||||||||||||||
| Year 3 | fill in the blank 5cffd20c4f9cfe8_11 | fill in the blank 5cffd20c4f9cfe8_12 | fill in the blank 5cffd20c4f9cfe8_13 | fill in the blank 5cffd20c4f9cfe8_14 | fill in the blank 5cffd20c4f9cfe8_15 | |||||||||||||||
| Year 4 | fill in the blank 5cffd20c4f9cfe8_16 | fill in the blank 5cffd20c4f9cfe8_17 | fill in the blank 5cffd20c4f9cfe8_18 | fill in the blank 5cffd20c4f9cfe8_19 | 0 | |||||||||||||||
| $fill in the blank 5cffd20c4f9cfe8_20 | $fill in the blank 5cffd20c4f9cfe8_21 | $fill in the blank 5cffd20c4f9cfe8_22 | ||||||||||||||||||
b. Journalize the entries for the issuance of the note and the four annual note payments.
Note: For a compound transaction, if an amount box does not require an entry, leave it blank. For the Year 4 entry (due to rounding), adjust Notes Payable up or down to ensure that debits equal credits.
| Year 1 Jan. 1 | fill in the blank a0c0bef69fa507c_2 | ||
| fill in the blank a0c0bef69fa507c_4 | |||
| Year 1 Dec. 31 | fill in the blank a0c0bef69fa507c_6 | fill in the blank a0c0bef69fa507c_7 | |
| fill in the blank a0c0bef69fa507c_9 | fill in the blank a0c0bef69fa507c_10 | ||
| fill in the blank a0c0bef69fa507c_12 | fill in the blank a0c0bef69fa507c_13 | ||
| Year 2 Dec. 31 | fill in the blank a0c0bef69fa507c_15 | fill in the blank a0c0bef69fa507c_16 | |
| fill in the blank a0c0bef69fa507c_18 | fill in the blank a0c0bef69fa507c_19 | ||
| fill in the blank a0c0bef69fa507c_21 | fill in the blank a0c0bef69fa507c_22 | ||
| Year 3 Dec. 31 | fill in the blank a0c0bef69fa507c_24 | fill in the blank a0c0bef69fa507c_25 | |
| fill in the blank a0c0bef69fa507c_27 | fill in the blank a0c0bef69fa507c_28 | ||
| fill in the blank a0c0bef69fa507c_30 | fill in the blank a0c0bef69fa507c_31 | ||
| Year 4 Dec. 31 | fill in the blank a0c0bef69fa507c_33 | fill in the blank a0c0bef69fa507c_34 | |
| fill in the blank a0c0bef69fa507c_36 | fill in the blank a0c0bef69fa507c_37 | ||
| fill in the blank a0c0bef69fa507c_39 | fill in the blank a0c0bef69fa507c_40 |
c. How will the annual note payment be reported
in the Year 1 income statement?
of $fill in the blank 4b0e5904d024042_2 would be
reported on the income statement.
Solutions
Expert Solution
a) Ammortization of Installment Notes
| Year Ending December 31 | January 1 Carrying Amount | Note Payment (Cash Paid) | Interest expennse(10% of January 1 Note Carrying Amount) | Decrease in Notes Payable | December 31 Carrying Amount |
| Year 1 | $39,000 | $12,303 | $3,900 | $8,403 | $30,597 |
| (10%x39000) | (12303-3900) | (39000-8403) | |||
| Year 2 | $30,597 | $12,303 | $3,060 | $9,243 | $21,354 |
| (10%x30597) | (12303-3060) | (30597-9243) | |||
| Year 3 | $21,354 | $12,303 | $2,135 | $10,168 | $11,186 |
| (10%x21354) | (12303-2135) | (21354-10168) | |||
| Year 4 | $11,186 | $12,303 | $1,117 | $11,186 | 0 |
| (12303-11186) | (12303-11186) | (11186-11186) |
b) Journal Entries
| Date | Accounts | Debit | Credit |
| Year 1 Jan 1 | Cash | $39,000 | |
| Notes Payable | $39,000 | ||
| Year 1 Dec 31 | Notes Payable | $8,403 | |
| Interest Expense | $3,900 | ||
| Cash | $12,303 | ||
| Year 2 Dec 31 | Notes Payable | $9,243 | |
| Interest Expense | $3,060 | ||
| Cash | $12,303 | ||
| Year 3 Dec 31 | Notes Payable | $10,168 | |
| Interest Expense | $2,135 | ||
| Cash | $12,303 | ||
| Year 4 Dec 31 | Notes Payable | $11,186 | |
| Interest Expense | $1,117 | ||
| Cash | $12,303 | ||
c)$3,900 of $12,303 would be reported on the income statement as interest expense.
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