Tony’s favorite memories of his childhood were the times he spent with his dad a
ID: 2583942 • 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, 2020, Great Adventures obtained a $520,000, 6%, 8-year installment loan from Summit Bank. Payments of $6,834 are required at the end of each month over the life of the 8-year loan. Each monthly payment of $6,834 includes both interest expense and principal payments (i.e., reduction of the loan amount). Late that night Tony exclaimed, “$520,000 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. Complete the first three rows of an amortization table.
2. Record the note payable on January 1, 2020, and the first two payments on January 31, 2020, and February 28, 2020
Explanation / Answer
Amortization Schedule of 1 years on Monthly payment Installment No. Interest Principal Installment Amount Outstanding Principal 520000 1 $ 2,600 $ 4,234 $ 6,834 $ 515,766 2 $ 2,579 $ 4,255 $ 6,834 $ 511,512 3 $ 2,558 $ 4,276 $ 6,834 $ 507,236 4 $ 2,536 $ 4,297 $ 6,834 $ 502,938 5 $ 2,515 $ 4,319 $ 6,834 $ 498,620 6 $ 2,493 $ 4,340 $ 6,834 $ 494,279 7 $ 2,471 $ 4,362 $ 6,834 $ 489,917 8 $ 2,450 $ 4,384 $ 6,834 $ 485,533 9 $ 2,428 $ 4,406 $ 6,834 $ 481,127 10 $ 2,406 $ 4,428 $ 6,834 $ 476,699 11 $ 2,383 $ 4,450 $ 6,834 $ 472,249 12 $ 2,361 $ 4,472 $ 6,834 $ 467,777 Journal Entry No. Date Name of Account & Description Debit Credit 1 1-Jan-20 Cash 520000 Bonds Payable 520000 (Being 6%, 8 year Bonds payable @monthly interest) 2 31-Jan-20 Interest Expenses 2600 Bonds Payable 4234 Cash 6834 (Being monthly installment paid) 3 28-Feb-20 Interest Expenses 2579 Bonds Payable 4255 Cash 6834 (Being monthly installment paid)