On November 30, 2020, Calla Resources Ltd. borrowed $100,000 from a bank by signing a four-year installment note bearing interest at 12%. The terms of the note require equal payments each year on November 30, starting November 30, 2021.

Required

1. Calculate the size of each installment payment.

2. Complete an installment note amortization schedule for this note similar to Exhibit 14.19.

3. Present the journal entries that Calla would make to record accrued interest as of December 31, 2020 (the end of the annual reporting period), and the first payment on the note.

4. Now assume that the note does not require equal payments but does require four payments that include accrued interest and an equal amount of principal in each payment. Complete an installment note amortization schedule for this note similar to Exhibit 14.18. Present the journal entries that Calla would make to record accrued interest as of December 31, 2020 (the end of the annual reporting period), and the first payment on the note.

Exhibit 14.18

Exhibit 14.18

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(C) Debit (A) (B) Debit (D) Credit (E) Beginning Interest Notes Ending Balance (A) – (C) Payable $60,000/3 Balance Expense 8% x (A) Cash Period Ending Prior (E) (B) + (C) $60,000 $4,800 $20,000 $24,800 $40,000 Dec. 31/20. 40,000 Dec. 31/21 20,000 3,200 20,000 23,200 20,000 20,000 $60,000 Dec. 31/22 1,600 $9,600 21,600 $69,600 -0- $20,000 Principal Payments Decreasing Decreasing Accrued Total |Principal Interest Payments Interest $1,600 2022 $20,000 2021 $20,000 $3,200 $20,000 2020 $4,800 $10,000 $15,000 $25,000 $0 $5,000 $20,000 Payment Pattern End of Year (A) (B) Debit (C) Debit (D) Credit (E) Beginning Interest Notes Ending Balance Expense 8% x (A) Payable Cash Balance Period Ending Prior (E) (D) – (B) (B) + (C) (A) – (C) Dec. 31/20. $60,000 $4,800 $18,482 $23,282 $41,518 Dec. 31/21. Dec. 31/22. 41,518 3,321 19,961 23,282 21,557 21,557 1,725 21,557 $60,000 23,282 -0- $9,846 $69,846 Increasing Principal Amounts Decreasing Accrued Total |Principal Interest Payments Interest 2022 $21,557 $1,725 2021 $19,961 $3,321 2020 $18,482 $4,800 $0 $5,000 $10,000 $15,000 $20,000 $25,000 Payment Pattern End of Year