A partial amortization schedule for a five-year note payable that Holly Co. issued on January 1, 2014, is shown here:

Accounting Period	Principal Balance January 1	Cash Payment	Applied to Interest	Applied to Principal
2014	$131,000	$35,445	$14,410	$21,035
2015	109,965	35,445	12,096	23,349

References

Section BreakExercise 7-11 Amortization of a long-term loan LO 7-5

6.

Award: 0 out of 2.00 points

Exercise 7-11 Part a

Required

a.	What rate of interest is Holly Co. paying on the note?

eBook & Resources

eBook: LO 7-5 Show how installment notes affect financial statements.

References

WorksheetDifficulty: 3 Hard

Exercise 7-11 Part aLearning Objective: 07-05 Show how installment notes affect financial statements.

Ask your instructor a question

7.

Award: 0 out of 8.00 points

Exercise 7-11 Part b

b.

Using a financial statements model like the one shown below, record the appropriate amounts for the following two events. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element is not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.)

(1)

January 1, 2014, issue of the note payable.

(2)

December 31, 2015, payment on the note payable.

HOLLY CO.

Effect of Transactions on Financial Statements

Event No.

Balance Sheet

Income Statement

Statement of Cash Flow

Assets

=

Liabilities

+

Stockholder's Equity

Revenue

Expense

=

Net Income

2014

1.

=

+

=

2015

2.

=

+

=

=

+

eBook & Resources

eBook: LO 7-5 Show how installment notes affect financial statements.

References

WorksheetDifficulty: 3 Hard

Exercise 7-11 Part bLearning Objective: 07-05 Show how installment notes affect financial statements.

Ask your instructor a question

8.

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Exercise 7-11 Part c

c.

If the company earned $88,600 cash revenue and paid $53,160 in cash expenses in addition to the interest in 2014, what is the amount of each of the following? (Cash outflows should be indicated with a minus sign.)

(1)	Net income for 2014
(2)	Cash flow from operating activities for 2014
(3)	Cash flow from financing activities for 2014

eBook & Resources

eBook: LO 7-5 Show how installment notes affect financial statements.

References

WorksheetDifficulty: 3 Hard

Exercise 7-11 Part cLearning Objective: 07-05 Show how installment notes affect financial statements.

Ask your instructor a question

9.

Award: 0 out of 1.00 point

Exercise 7-11 Part d

d.	What is the amount of interest expense on this loan for 2015? (Round your answers to the nearest whole dollar amount.)