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Mashloum
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| Posted: 22 Mar 2016 at 02:50 | IP Logged
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World Co. borrowed $1,000,000 on a 9% note payable.
World paid the first of four quarterly payments of
$264,200 when due on December 30. In its December 31
balance sheet, what amount should World report as note
payable
How we can calculate the second, third and last quarter
principal and interest amount
appreciate your help
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nambivar
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| Posted: 22 Mar 2016 at 22:46 | IP Logged
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The amount repaid 264000 consists of interest on one million for one quarter at 9% p.a. plus part-principal; the interest works out to 1000000*0.25*9/100= 22500; the principal repaid is therefore: 264000-22500= 241500. This 241500 reduces the balance in Notes Payable account to [1000000-241500] = 758500.
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Mashloum
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| Posted: 23 Mar 2016 at 01:54 | IP Logged
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Thank you for your quick reply, but please the second,
third and last quarter
principal and interest amount
appreciate your help
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nambivar
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| Posted: 24 Mar 2016 at 21:19 | IP Logged
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here is the working:Interest for next quarter= 758500*0.25*0.09=17066;
so, principal portion repaid is 264000-17066=246934;
new balance in notes payable is 758500-246934=511566;
Interest for next quarter= 511566*0.09*.025=11510;
so, principal portion repaid is 264000-11510=252490;
Interest for next quarter= 252490*0.25*0.09=5681;
total amount to pay off the balance outstanding in notes payable a/c= 252490+5681=258171.
Hope this helps.
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ilysaml
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| Posted: 27 Mar 2016 at 15:36 | IP Logged
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Can you provide a journal entry for this problem? Total
future payment for interest and principal will be
1,056,800 however, the face plus the acrrued interest
should total 1,090,000 right?
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Topic: Notes payable
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