Question

On January 1, 2020, ABC Company borrowed $200,000 from the bank. The loan is
a 10-year note payable that requires semi-annual payments of $24,000 every
June 30 and December 31, beginning June 30, 2020. Assume the loan has a 20%
interest rate, compounded semi-annually.

Calculate the amount of the note payable at December 31, 2020 that would be
classified as a long-term liability.

Answer 1

Answer : $191,600

Notes Payable on 1st Jan 2020 = $200,000

On June 30 2020 ,

Payment = 24,000

Interest = 200,000*20%*6/12 =20,000

payment of Principal Amount = 24,000-20,000 =4,000

Carrying Value of the Notes Payable = 200,000-4,000 = $196,000

On Dec 31 2020

Payment = 24,000

Interest = 196,000*20%*6/12 = 19,600

Principal Payment = 24,000-19,600 = 4,400

Carrying Value of the note = 196,000-4,400 = 191,600 (Answer)

Long-term Liability on Dec 31, 2020, = 191,600