On January 1, 1998, Umbrella Corporation sold inventory costing $30,000 to Burns Industries. In return, Umbrella Corporation received a 4-year, 9% note with a face value of $100,000. Blended payments will be made yearly on December 31, and will include principal and interest. The market rate of interest is 5%. Umbrella Corporation has a December 31 year-end while Burns Industries year-end is August 31.

Instructions:

a) Calculate the annual payments Umbrella Corporation will receive each year from Burns Industries. Use the stated rate of the note in your calculation.

Annual Payment

=$

b) Complete the following payment and amortization schedule for the note, except for where there is "keep blank" written. (Also please make sure to include 2 decimal places for all the answers for b).

	Cash Received	Interest Revenue (5%)	Principal Reduction	Carrying Value of Note
Jan. 1, 1998	Keep blank	Keep blank	Keep blank
Dec. 31, 1998
Dec. 31, 1999
Dec. 31, 2000
Dec. 31, 2001

c) Record the journal entries for Umbrella Corporation on January 1, 1998 and December 31, 1998.