Question

On January 1, Year 1, Brown Co. borrowed cash from First Bank by issuing a $112,000 face-value, four-year term note that had an 8 percent annual interest rate. The note is to be repaid by making annual cash payments of $33,815 that include both interest and principal on December 31 of each year. Brown used the proceeds from the loan to purchase land that generated rental revenues of $64,000 cash per year.

Required
a. Prepare an amortization schedule for the four-year period. (Round your answers to the nearest dollar amount.)

BROWN CO.Amortization Schedule$112,000, 4-Yr. Term Note, 8% Interest Rate

YearPrin. Bal. on

Prin. Bal onJan. 1/ Cash Pay. Dec. 31/ Applied to Interest/ Applied to Principal/ Prin Bal. End of PeriodYear 1

Year 2

Year 3

Year 4

Answer 1

Preparation of Amortization schedule 112000 4 year term note, 8% on interest note-

	prin. Balance on Jan.1	Cash pay Dec. 31	Applied to Interest (8% of opening balance)	Applied to Principal (Cash pay - applied interest)	Prin. Bal End of period (opening bal. - applied to principal)
Year 1	112000.00	33815.00	8960.00	24855.00	87145.00
Year 2	87145.00	33815.00	6971.60	26843.40	60301.60
Year 3	60301.60	33815.00	4824.13	28990.87	31310.73
Year 4	31310.73	33815.00	2504.86	31310.14	0.59

Note - 1. Applied to interest calculation will be as follows -

opening principal balance *8%

2. Applied to principal = Cash pay installment - Applied interest

3. Prin. balance end of period = principal bal. as on jan.1 - Applied to principal.

4. Prin. bal. end of period become prin. bal. on jan 1.

Please check with your answer and let me know.