Answer:
1)
the annual installment = $7,952.94
total Interest paid = $905.88
Year Beginning Interest Repaid Ending
Notes Payable Expense Principal Notes Payable
1 $15,000 $600 $7,352.94 $7,647.06
2 $7,647.06 $305.88 $7,647.06 $0
2)
March 31, 2018, accrued interests on notes payable
Dr Interest expense 150
Cr Interest payable 150
June 30, 2018, accrued interests on notes payable
Dr Interest expense 150
Cr Interest payable 150
September 30, 2018, accrued interests on notes payable
Dr Interest expense 150
Cr Interest payable 150
December 31, 2018, accrued interests on notes payable
Dr Interest expense 150
Cr Interest payable 150
December 31, 2018, first installment on notes payable
Dr Notes payable 7,352.94
Dr Interest payable 600
Cr Cash 7,952.94
3)
March 31, 2019, accrued interests on notes payable
Dr Interest expense 76.47
Cr Interest payable 76.47
1. The Amortization schedule is:
Year Beginning Notes Interest expense Repaid Principle Ending notes
Payable on notes payable Payable
2018 15,000 600 7,353 7,647
2019 7,647 306 7,647 0
The annual payment is an annuity and can be found as:
Loan= Annuity x Present value interest factor of annuity, 4%, 2 years
15,000 = Annuity x 1.886
Annuity = 15,000 / 1.886
= $7,953
Principal repaid in first year = Amount paid - interest
= 7,953 - (15,000 x 4%)
= 7,953 - 600
= $7,353
Principal repaid in second year
= 7,953 - (4% x 7,647)
= $7,647
2.
Date Account title Debit Credit
Jan 1, 2018 Cash $15,000
Notes Payable $15,000
Date Account title Debit Credit
March 31, 2018 Interest expense $150
Interest payable $150
Working:
= Loan amount x Rate x period of loan so far
= 15,000 x 4% x 3/ 12 months
= $150
Date Account title Debit Credit
Dec 1, 2018 Interest payable $600
Notes payable $7,353
Cash $7,953
3. Interest accrued March 31,2019:
= Loan amount in second year x 4% x 3/12 months
= 7,647 x 4% x 3/12
= $76
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