Tony’s favorite memories of his childhood were the times he spent with his dad a
ID: 2472692 • Letter: T
Question
Tony’s favorite memories of his childhood were the times he spent with his dad at camp. Tony was daydreaming of those days a bit as he and Suzie jogged along a nature trail and came across a wonderful piece of property for sale. He turned to Suzie and said, “I’ve always wanted to start a camp where families could get away and spend some quality time together. If we just had the money, I know this would be the perfect place.” They called several banks and on January 1, 2014, Great Adventures obtained $430,000, 6%, 7-year installment loan from Summit Bank. Monthly payments of $6,282 are required at the end of each month over the life of the 7-year loan. Each monthly payment of $6,282 includes both interest expense and principal payments (i.e., reduction of the loan amount.) Late that night Tony exclaimed, "$430,000 for our new camp, this has to be the best news ever.” Suzie snuggled close and said, “There’s something else I need to tell you, Tony, I’m expecting!” They decided right then, if it was a boy, they would name him Venture. 1.value: 10.00 pointsRequired information Required: 1. Complete the first three rows of an amortization table. (Round your final answers to the nearest dollar amount. Omit the "$" sign in your response.) Date Cash Paid Interest Expense Decrease in Carrying Value Carrying Value 1/1/14 $ 1/31/14 $ $ $ 2/28/14 ReferenceseBook & Resources WorksheetDifficulty: Hard Check my work 2.value: 10.00 pointsRequired information 2. Record the note payable on January 1, 2014, and the first two payments on January 31, 2014, and February 28, 2014. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount. Omit the "$" sign in your response.) Date General Journal Debit Credit Jan.1, 2014 Jan.31, 2014 Feb.28, 2014
Explanation / Answer
Note:
Interest for the first month = $430000 * 6% * (1/12) = $2150
Decrease in carrying value = Principal repayment in the first instalment= cash paid - interest expense = $6282 - $2150 = $4132
Carrying value after the first instalment = $430000 - principal payment = $430000 - $4132 = $425868
The amounts for the second instalment have been calculated in the same manner.
Journal Entry:
Date Cash paid Interest expense decrease in carrying value Carrying value 01-01-2014 $ 4,30,000.00 1/31/14 $ 6,282.00 $ 2,150.00 $ 4,132.00 $ 4,25,868.00 2/28/14 $ 6,282.00 $ 2,129.00 $ 4,153.00 $ 4,21,715.00