On November 1, 2015, Norwood borrows $430,000 cash from a bank by signing a five-year installment note bearing 5% interest. The note requires equal total payments each year on October 31. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.) Required: 1. Complete the below table to calculate the total amount of each installment payment.

On November 1, 2015, Norwood borrows $430,000 cash from a bank by signing a five-year installment note bearing 5% interest. The note requires equal total payments each year on October 31. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.)

Required:
1.	Complete the below table to calculate the total amount of each installment payment.

Complete an amortization table for this installment note.

Prepare the journal entries in which Norwood records the following:

(a)	Accrued interest as of December 31, 2015 (the end of its annual reporting period).

Explanation:

1.

Note balance	$	430,000
Number of periods		5
Interest rate		5	%
Value from Table B.3		4.3295
Payment ($430,000 / 4.3295)	$	99,319

 
2.

Beginning Balance = Prior Ending Balance

Debit Interest expense = 5% × Beginning Balance

Debit Notes Payable = Credit Cash – Debit Interest expense

Credit Cash = Computed

Ending Balance = Beginning Balance – Debit Notes Payable

 
3.

Dec. 31: Accrued interest on the installment note payable ($21,500 × 2/12) = $3,583

Oct. 31: Record first payment on installment note (interest expense = $21,500 – $3,583) = $17,917

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Legacy issues $740,000 of 7.5%, four-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. They are issued at $680,186 and their market rate is 10% at the issue date.

Legacy issues $740,000 of 7.5%, four-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. They are issued at $680,186 and their market rate is 10% at the issue date.

Prepare the January 1, 2015, journal entry to record the bonds' issuance.

Determine the total bond interest expense to be recognized over the bonds' life.

Explanation:

Eight payments of $27,750*	$	222,000
Par value at maturity		740,000
Total repaid		962,000
Less amount borrowed		(680,186)
Total bond interest expense	$	281,814

   

*Semiannual interest payment, computed as $740,000 × 0.075 × ½ year = $27,750.

Prepare a straight-line amortization table for the bonds' first two years.

Straight-line amortization table ($59,814 / 8 = $7,477)

Prepare the journal entries to record the first two interest payments

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Hillside issues $2,300,000 of 8%, 15-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $2,815,190. Required: 1. Prepare the January 1, 2015, journal entry to record the bonds’ issuance.

Hillside issues $2,300,000 of 8%, 15-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $2,815,190.

Required:
1.	Prepare the January 1, 2015, journal entry to record the bonds’ issuance.

For each semiannual period, complete the table below to calculate the cash payment.

Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.

5.	Prepare the journal entries to record the first two interest payments.

Explanation:

2(a)	Cash Payment = $2,300,000 × 8% × 6/12 year = $92,000
(b)	Premium = $2,815,190 – $2,300,000 = $515,190
	Straight-line premium amortization = $515,190 / 30 semiannual periods
	= $17,173
(c)	Bond interest expense = $92,000 – $17,173 = $74,827

3.

Thirty payments of $92,000	$	2,760,000
Par value at maturity		2,300,000
Total repayment		5,060,000
Less amount borrowed		(2,815,190)
Total bond interest expense	$	2,244,810

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