Problem 106A Installment notes LO C1 On November 1 2017 Norw

Problem 10-6A Installment notes LO C1 On November 1, 2017, Norwood borrows $540,000 cash from a bank by signing a five-year installment note bearing 7% interest. The note requires equal payments of $131,701 each year on October 31. Table B1. 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 this question by entering your answers in the tabs below

Solution

Amort chart Ending date Beginning Debit Interest Debit Notes Credit Cash Ending Balance Expense Payable Balance 31.10.18 540,000 37800 93901 131701 446,099 31.10.19 446,099 31227 100474 131701 345,625 31.10.20 345,625 24194 107507 131701 238,118 31.10.21 238,118 16668 115033 131701 123,085 31.10.22 123,085 8616 123085 131701 0 Journal entries Date Accounts title and explanations Debit $ Credit $ 31.12.17 Interest expense Account Dr. 6300    Interest payable (540000*7%*2/12) 6300 31.10.18 Interest expense Account Dr. (540000*7%*10/12) 31500 Interest payable Account Dr. 6300 Notes payable Account Dr. 93901      Cash account 131701