Question

Lake Company sold some machinery to View Company on January 1, 2017, for which the cash selling price was $758,200. View entered into an installment sales contract with Lake at a 10% interest rate. The contract required payments of $200,000 a year over five years with the first payment due on December 31, 2017.

Required:

Prepare an amortization schedule that shows what portion of each $200,000 payment will be shown as interest income over the period 2017–2021. (Round your answers to the nearest whole dollar amount.)

Answer 1

Year ending	Beginning receivable balance	Interest income	Annual payment	Reduction of receivable	Ending Receivable balance
	a	b=a*10%	c	d=c-b	e=a-d
December 31, 2017	$       7,58,200	$     75,820	$   2,00,000	$ 1,24,180	$   6,34,020
December 31, 2018	$       6,34,020	$     63,402	$   2,00,000	$ 1,36,598	$   4,97,422
December 31, 2019	$       4,97,422	$     49,742	$   2,00,000	$ 1,50,258	$   3,47,164
December 31, 2020	$       3,47,164	$     34,716	$   2,00,000	$ 1,65,284	$   1,81,881
December 31, 2021	$       1,81,881	$     18,119	$   2,00,000	$ 1,81,881	$                -0
Total	$     24,18,687	$ 2,41,800	$ 10,00,000	$ 7,58,200	$ 16,60,487
Note:
The difference of $ 69 is adjusted in interest income in year 2021.