Question

# On December 31, 2020, Teal Company signed a \$1,022,000 note to Flint Bank. The market interest...

On December 31, 2020, Teal Company signed a \$1,022,000 note to Flint Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Teal’s financial situation worsened. On December 31, 2022, Flint Bank determined that it was probable that the company would pay back only \$613,200 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the \$1,022,000 loan.

Prepare a note amortization schedule for Flint Bank up to December 31, 2022. (Round answers to 0 decimal places, e.g. 5,275.)

Note Amortization Schedule
(Before Impairment)

Date

Cash

Interest
Revenue

Increase in
Carrying
Amount

Carrying
Amount of
Note

12/31/20 \$enter a dollar amount
12/31/21 \$enter a dollar amount \$enter a dollar amount \$enter a dollar amount enter a dollar amount
12/31/22 enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount

Part A:

Cash received by Flint Company on December 31, 2020:

Present value of principal (\$1,022,000 * pvif(11%,5yrs) 0.59345) = 606,506

Present value of interest (\$(1,022,000*9%) * pvifa(11%,5yrs) 3.69590) = 339,949

Part B:

Note Amortization Schedule

(Before Impairment)

 Date cash received (9%) intereste revenue (11%) carrying amount December 31, 2020 946,455 December 31, 2021 91,980 (1022000*9%) 104,110 (946,455*11%) 958,585 (946,455+(104,110-91,980)) December 31, 2022 91,980 (1022000*9%) 105,444 972,049 (958,585+(105,444-91,980))

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