Grouper Inc. developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Grouper offered a low downpayment and low car payments for the first year after purchase. It believes that this promotion will bring in some new buyers. On January 1, 2017, a customer purchased a new $31,000 automobile, making a downpayment of $1,160. The customer signed a note indicating that the annual rate of interest would be 12% and that quarterly payments would be made over 3 years. For the first year, Grouper required a $373 quarterly payment to be made on April 1, July 1, October 1, and January 1, 2018. After this one-year period, the customer was required to make regular quarterly payments that would pay off the loan as of January 1, 2020.

1. Prepare a note amortization schedule for the first year.

Date Cash Paid Interest Expense Discount Amortized Carrying Amount of Note

1/1/17

4/1/17

7/1/17

10/1/17

1/1/18

2. Indicate the amount the customer owes on the contract at the end of the first year.

3. Compute the amount of the new quarterly payments.

4. Prepare a note amortization schedule for these new payments for the next 2 years.

Date Cash Paid Interest Expense Discount Amortized Carrying Amount of Note

1/1/18

4/1/18

7/1/18

10/1/18

1/1/19

4/1/19

7/1/19

10/1/19

1/1/20