I-13.02 Problem

I-13.02 Problem - (a) Prepare journal entries for the...

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I-13.02 Rodriquez Oil and Gas borrowed $1,000,000 from a local bank to obtain funds needed for the construction of a new drilling rig. This "construction" loan was represented by a 2-year, 7%, promissory note, dated April 1, 20X3. Interest (only) is payable on March 31, 20X4, and again at maturity. The $1,000,000 principal is due on March 31, 20X5. Rodriguez repaid the promissory note on March 31, 20X5, as agreed. On April 1, 20X5, Rodriguez secured permanent equipment financing via a $1,200,000, 5- year loan. This loan was at 6% per annum, and requires level quarterly payments so that the loan will be completely repaid at its maturity.
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Unformatted text preview: (a) Prepare journal entries for the $1,000,000 loan to record the loan's issuance (April 1, 20X3); accrued interest at December 31, 20X3; the interest payment on March 31, 20X4; accrued interest at December 31, 20X4; and the final payment at maturity (March 31, 20X5). (b) Calculate the required quarterly payment for the 5-year loan. (c) Prepare journal entries to record the 5-year loan, and its first two quarterly payments. (d) Optional: Use an electronic spreadsheet to prepare a 20-quarter amortization schedule, showing how the loan will be fully amortized by its maturity....
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