On January 1, 2014, Muller Co. borrowed cash from Washington Valley Bank by issuing a $100,000 face value 3-year installment note payable that carried a 7% interest rate. The note is to be repaid by making annual cash payments of $38,105, which includes both principal and interest. The payments are to be made on December 31 of each year.

Required:

a) Prepare an amortization schedule for the term of the loan, showing the amounts to be paid on principal and interest for 2014, 2015, and 2016 and the loan balance at the end of each year.

b) What amount of interest expense will be shown on the 2015 income statement?

c) What amount of liability for the note will be shown on the balance sheet on December 31, 2015?

a)

	Balance Beginning of Period	Interest	Principal	Balance End of Period
Year 1	$	$	$	$
Year 2	$	$	$	$
Year 3	$	$	$	$

b)

c)