Question

Chapter 10 Question 2:

On November 1, 2017, Norwood borrows $410,000 cash from a bank by signing a five-year installment note bearing 9% interest. The note requires equal payments of $105,407 each year on October 31. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.)

Required:

1. Complete an amortization table for this installment note.
2. Prepare the journal entries in which Norwood records the following:
(a) Accrued interest as of December 31, 2017 (the end of its annual reporting period).
(b) The first annual payment on the note.

Complete an amortization table for this installment note. (Round your intermediate calculations to the nearest dollar amount.)

	Period Ending Date Beginning Balance Debit Interest Expense + Debit Notes Payable = Credit Cash Ending Balance 10/31/2018 10/31/2019 10/31/2020 10/31/2021 10/31/2022 Total

Prepare the journal entries in which Norwood records for accrued interest as of December 31, 2017 (the end of its annual reporting period) and the first annual payment on the note.

Journal entry worksheet

Record the interest accrued on the note as of December 31, 2017.

Note: Enter debits before credits.

	Date General Journal Debit Credit Dec 31, 2017

Prepare the journal entries in which Norwood records for accrued interest as of December 31, 2017 (the end of its annual reporting period) and the first annual payment on the note.

Journal entry worksheet

Record the first installment payment on October 31, 2018. Assume no reversing entries were prepared.

Note: Enter debits before credits.

	Date General Journal Debit Credit Oct 31, 2018

Answer 1

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1		A	B=E of previous year*9%	C=D-B	D	E=A-C
	Period ending	Beginning Balance	Interest	=+Debit Not payable	=Cash	Ending Balance
						410000
	31-Oct-18	410000	36900	68507	105407	341493
	31-Oct-19	341493	30733	74674	105407	266819
	31-Oct-20	266819	24013	81394	105407	185425
	31-Oct-21	185425	16687	88720	105407	96705
	31-Oct-22	96705	8701	96706	105407	0
	Total		1,17,035	4,10,000

Date	Account	Debit	Credit
31-Dec-17	Interest Exp	6,150
	Interest Payable		6,150
	(2 Month Int 36900*2/12)
31-Oct-18	Note Payable	68,507
	Interest Exp (10 Month)	30,750
	Interest Payable (2 Month)	6,150
	Cash		1,05,407