Tony’s favorite memories of his childhood were the times he spent with his dad a
ID: 2481758 • 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, 2017, Great Adventures obtained a $510,000, 6%, 9-year installment loan from Summit Bank. Monthly payments of $6,123 are required at the end of each month over the life of the 9-year loan. Each monthly payment of $6,123 includes both interest expense and principal payments (i.e., reduction of the loan amount.)
Late that night Tony exclaimed, “$510,000 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.
Complete the first three rows of an amortization table.
2.Record the note payable on January 1, 2017, and the first two payments on January 31, 2017, and February 28, 2017. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)
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, 2017, Great Adventures obtained a $510,000, 6%, 9-year installment loan from Summit Bank. Monthly payments of $6,123 are required at the end of each month over the life of the 9-year loan. Each monthly payment of $6,123 includes both interest expense and principal payments (i.e., reduction of the loan amount.)
Explanation / Answer
1.First three rows of an amortization table.
2. Journal Entries for note payable on January 1, 2017, and the first two payments on January 31, 2017, and February 28, 2017.
Monthly interest rate =6%/12=0.5% (1) (2) (3) (4) (5) Date Cash Paid$(Monthly Payments) Interest Expense$(carrying value * monthly interest rate) Decrease in Carrying Value$ (2)-(3) Carrying Value$ (Prior Carrying value - (4) 01/01/2017 510,000 01/31/2017 6,123 2,550 3,573 506,427 02/28/2017 6,123 2,532 3,591 502,836