Homework SourseACC Inter ch 14 a Emma Company purchased a machine from Noah
ACC Inter ch 14
a) Emma Company purchased a machine from Noah Corporation on October 31, 2016. In payment for the $140,300 purchase, Emma issued a one-year installment note to be paid in equal monthly payments of $12,465 at the end of each month. The payments include interest at an annual rate of 12%. When recording the December 31, 2016 payment, the Debit to Interest expense will be? $_________
b) Pope Industries purchased a machine from Fitz Corporation on October 1, 2016. In payment for the $211,000 purchase, Pope issued a two year installment note to be paid in equal semi-annual payments at the end of each 6 month period. The payments include interest at an annual rate of 12%.
Each installment payment will be $__________________
Solution
Interest rate per month = 1% (12%/12)
A
Date
Outstanding amount
(A)
Interest @1% (B)
Total amount outstanding
(C=A+B)
Instalment amount
(D)
Balance (E=C-D)
30-Nov-16
140,300
1,403
141,703
12,465
129,238
31-Dec-16
129,238
1,292
130,530
12,465
118,065
31-Jan-17
118,065
1,181
119,246
12,465
106,781
28-Feb-17
106,781
1,068
107,849
12,465
95,384
31-Mar-17
95,384
954
96,338
12,465
83,873
30-Apr-17
83,873
839
84,711
12,465
72,246
31-May-17
72,246
722
72,969
12,465
60,504
30-Jun-17
60,504
605
61,109
12,465
48,644
31-Jul-17
48,644
486
49,130
12,465
36,665
31-Aug-17
36,665
367
37,032
12,465
24,567
30-Sep-17
24,567
246
24,813
12,465
12,348
31-Oct-17
12,348
123
12,471
12,465
6
Ans
Interest expense till 31 Dec 2017
Nov month
$1,403
Dec month
$1,292
Total
$2,695
B
Total no of instalments = 4
Interest rate per instalment (semi-annual) =6%
Annuity factor at 6% for 4 instalments = 3.46511
Instalment amount = total amount to be paid/Annuity factor
Ans
Instalment = $211,000/3.46511
$60,892.73
| Interest rate per month = 1% (12%/12) | ||||||
| A | Date | Outstanding amount | Interest @1% (B) | Total amount outstanding | Instalment amount | Balance (E=C-D) |
| 30-Nov-16 | 140,300 | 1,403 | 141,703 | 12,465 | 129,238 | |
| 31-Dec-16 | 129,238 | 1,292 | 130,530 | 12,465 | 118,065 | |
| 31-Jan-17 | 118,065 | 1,181 | 119,246 | 12,465 | 106,781 | |
| 28-Feb-17 | 106,781 | 1,068 | 107,849 | 12,465 | 95,384 | |
| 31-Mar-17 | 95,384 | 954 | 96,338 | 12,465 | 83,873 | |
| 30-Apr-17 | 83,873 | 839 | 84,711 | 12,465 | 72,246 | |
| 31-May-17 | 72,246 | 722 | 72,969 | 12,465 | 60,504 | |
| 30-Jun-17 | 60,504 | 605 | 61,109 | 12,465 | 48,644 | |
| 31-Jul-17 | 48,644 | 486 | 49,130 | 12,465 | 36,665 | |
| 31-Aug-17 | 36,665 | 367 | 37,032 | 12,465 | 24,567 | |
| 30-Sep-17 | 24,567 | 246 | 24,813 | 12,465 | 12,348 | |
| 31-Oct-17 | 12,348 | 123 | 12,471 | 12,465 | 6 |
