Business
Understanding Financial Accounting
A company takes out a six-year, $500,000 long-term loan on

A company takes out a six-year, $500,000 long-term loan on March 1. The interest rate on the

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A company takes out a six-year, $500,000 long-term loan on March 1. The interest rate on the loan is 4% per year, and blended payments of $7,823 (including both interest and principal) are to be made at the end of each month. The following is an extract from the loan amortization table the bank provided the company:

Beginning Loan Balance 500,000 493,844 487,687 (5) Ending Loan Interest Principal Payment Balance 493,844 487,667 6,156

Required

a. Determine the missing amounts.

b. Prepare the journal entries to record the inception of the loan and the first two monthly payments.

c. The last loan payment (payment 72), includes $7,797 in principal repayment. Prepare the journal entries to record the last payment.

Transcribed Image Text:

Beginning Loan Balance 500,000 493,844 487,687 (5) Ending Loan Interest Principal Payment Balance 493,844 487,667 6,156 (3) 6,197 Payment 1 Payment 2 Payment 3 Payment 4 (1) 7,823 7,823 7,823 1,667 (2) 1,626 (6) (4) 475,252 6,218

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a 1 Amount is given Payment Interest Principal 1667 6156 7823 2 In...View the full answer

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Understanding Financial Accounting

ISBN: 9781119406921

2nd Canadian Edition

Authors: Christopher D. Burnley

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Question Posted: Jul 26, 2019 06:31 AM

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