Question

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

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