McCreys Muffler Repair MMR started Year 2 with 28000 cash 50

McCrey\'s Muffler Repair (MMR) started Year 2 with $28,000 cash. $5,000 had been contributed by investors, $15,000 is a result of Year 1 operations and $8,000 had been borrowed during Year 1 and must be repaid in full at the beginning of Year 3. During Year 2, MMR had the following transactions: 1. Paid $2,000 principal on the outstanding note. 2. Purchased land for $18,000 cash. 3. Earned $45,000 as a result of repairing mufflers. 4. Paid $40,000 of costs to generate those sales 5. Paid 14% interest on the balance due on the note. 6. Paid stockholders the maximum dividend advisable under the Going Concern principle. At the end of Year 2, what is the outstanding balance of the Note Payable? Do not enter any dollar signs or commas in your answers.

Solution

Computation Not payable Outstanding bal on Year-2 Detail Amount Total loan Borroewd during year-1 $8,000.00 Interst for Year -1 $1,120.00 ( 8000*14%) Total Outstanding in beginning of Year-2 $9,120.00 Interest for year-2 $1,276.80 (9120*14%) Total Outstanding balance $10,396.80 Repayment for Principal made in Year-2 $2,000.00 Balance on Beginging of Year-3 or end of Year 2 $8,396.80