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P2. On January 1, 2015 Tommy Inc. borrows $100,000 cash by signing a four-year, 7% installment...

P2. On January 1, 2015 Tommy Inc. borrows $100,000 cash by signing a four-year, 7% installment note. The note requires four equal payments of $29,523 of accrued interest and principal on December 31 of each year for the next four years. The first payment is due Dec 31, 2015.

Part 1. Prepare the amortization table for this installment note using the template below. Note that I completed the first line for you and left the totals as check figures.

1. Amortization table for the loan

(A) (B) + (C) = (D) (E)

Payments Period Ending Date Beginning Balance Debit Interest Expense Debit Notes Payable Credit Cash Ending Balance

[Prior (E)] [7% x (A)] [(D) - (B)] Crash [(A) - (C)]

2015...... $100,000 $ 7,000 $ 22,523 $ 29,523 $77,477

2016......

2017......

2018......

$18,092 $100,000 $118,092

*Adjusted for rounding.

Part 2. Prepare the journal entries for Tommy, Inc to record the loan on January 1, 2015 and the four payments from Dec 31, 2015 through Dec 31, 2018

.Date Account Name Debit Credit

Business   Accounting   
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Homework Answers

Answer #1
Period Ending Date Payment Payable Beginning Balance Debit Interest Exp Debit Notes Ending Balance
2015 29523 100000 7000 22523 77477
2016 29523 77477 5423 24100 53377
2017 29523 53377 3736 25787 27591
2018 29523 27591 1932 27591 0
Journal:
Debit Credit
January 1 2015 Cash 100000
Borrowing-Loan 100000
December 31 2015 Borrowing - Loan 22523
Interest Exp 7000
Cash 29523
December 31 2016 Borrowing - Loan 24100
Interest Exp 5423
Cash 29523
December 31 2017 Borrowing - Loan 25787
Interest Exp 3736
Cash 29523
December 31 2018 Borrowing - Loan 27591
Interest Exp 1932
Cash 29523
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