On January 1, Year 1, Bryson Company obtained a $63,000, four-year, 12% installm
ID: 2430158 • Letter: O
Question
On January 1, Year 1, Bryson Company obtained a $63,000, four-year, 12% installment note from Campbell Bank The note requires annual payments of $20,742, 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 carrying Am Interest Expense (12% of January 1 Note Carrying Amount) January 1 Note Payment Decrease in December 31 ount (Cash Paid) Notes Payable Carrying Amount Year 1 Year 2 Year 3 Year 4 0 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 Year 1 Dec. 31 Year 2 Dec. 31 Year 3 Dec. 31 Year 4 Dec. 31 7/21/2018 CengageNOW21Online teaching and learning resource from Cengage Learning c. How will the annual note payment be reported in the Year 1 income statement? of would be reported on the income statement.Explanation / Answer
a. Amortisation table
Carrying amount on Jan 1
Note payment
(Cash paid)
Interest expense
@12%
Decrease in
note payable
Carrying amount
on Dec 31
$7,560
($63,000 x 12%)
$13,182
($20,742 - $7,560)
$49,818
($63,000 - $13,182)
$5,978
($49,818 x 12%)
$14,764
($20,742 - $5,978)
$35,054
($49,818 - $14,764)
$4,206
($35,054 x 12%)
$16,536
($20,742 - $4,206)
$18,518
($35,054 - $16,536)
$2,224
($18,518 x 12%)
$18,518
($20,742 - $2,224)
$0
($18,518 - $18,518)
b. Journal entries:
Cash a/c
To 12% note payable a/c
(Being amount borrowed from Campbell bank)
$63,000
12% Notes payable a/c
Interest expense a/c
To Cash a/c
(Being 1st installment paid to Campbell bank)
$13,182
$7,560
$20,742
12% Notes payable a/c
Interest expense a/c
To Cash a/c
(Being 2nd installment paid to Campbell bank)
$14,764
$5,978
$20,742
12% Notes payable a/c
Interest expense a/c
To Cash a/c
(Being 3rd installment paid to Campbell bank
$16,536
$4,206
$20,742
12% Notes payable a/c
Interest expense a/c
To Cash a/c
(Being 4th installment paid to Campbell bank
$18,518
$2,224
$20,742
c. $7,560 of $20,742 would be reported on the income statement as expense
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Dec 31Carrying amount on Jan 1
Note payment
(Cash paid)
Interest expense
@12%
Decrease in
note payable
Carrying amount
on Dec 31
Year 1 $63,000 $20,742$7,560
($63,000 x 12%)
$13,182
($20,742 - $7,560)
$49,818
($63,000 - $13,182)
Year 2 $49,818 $20,742$5,978
($49,818 x 12%)
$14,764
($20,742 - $5,978)
$35,054
($49,818 - $14,764)
Year 3 $35,054 $20,742$4,206
($35,054 x 12%)
$16,536
($20,742 - $4,206)
$18,518
($35,054 - $16,536)
Year 4 $18,518 $20,742$2,224
($18,518 x 12%)
$18,518
($20,742 - $2,224)
$0
($18,518 - $18,518)