A partial amortization schedule for a 10-year note payable that Mabry Company issued on January 1, Year 1, is shown as follows.

Required

a. What rate of interest is Mabry Company paying on the note?

b. Using a financial statements model like the one shown, record the appropriate amounts for the following two events:

(1) January 1, Year 1, issue of the note payable.

(2) December 31, Year 1, payment on the note payable.

c. If the company earned $62,000 cash revenue and paid $45,000 in cash expenses in addition to the interest in Year 1, what is the amount of each of the following?

(1) Net income for Year 1.

(2) Cash flow from operating activities for Year 1.

(3) Cash flow from financing activities for Year 1.

d. What is the amount of interest expense on this loan for Year 4?

Transcribed Image Text:

Principal Balance January 1 Applied to Interest Accounting Cash Applied to Principal Period Payment $27,174 27,174 27,174 $15,174 16,084 17,049 $200,000 $12,000 11,090 10,125 Year 1 Year 2 184,826 Year 3 168,742