Question

On February 1, Willmar Corporation borrowed $100,000 from its bank by signing a 12 percent, 15-year note payable. The note calls for 180 monthly payments of $1,300. Each payment includes interest and a principal component.

a. Compute the interest expense in February.

b. Compute the portion of Willmar’s March 31 payment that will be applied to the principal of the note. (Round your intermediate calculations and final answer to the nearest dollar amount.)

c. Compute the carrying value of the note on April 30. (Round your intermediate calculations and final answer to the nearest dollar amount.)

Answer 1

Loan Amortization Schedule
Date	Loan outstanding beginning (A)	Installment	Interest expense (A x 1%)	Reduction of principal	Loan outstanding ending
February	100,000	1,300	1,000	300	99,700
March	99,700	1,300	997	303	99,397
April	99,397	1,300	994	306	99,091

a.

Interest expense in February = $1,000

b.

Portion of March 31 payment applied to note = $303

c.

Carrying value of note on April 30 = $99,091