14 12 installmentnotes to compute cash payment use

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Unformatted text preview: llment Notes To compute cash payment use present value To tables. tables. o Each payment includes both an interest Each amount and a principal amount. amount o Interest expense or revenue: o Effective interest rate × Outstanding balance of debt Interest expense or revenue o Principal reduction: Cash amount – Interest component Principal reduction per period 14-13 Installment Notes Notes often are paid in installments, rather than a single amount at maturity. $666,633 amount of loan Date 01/01/13 06/30/13 12/31/13 06/30/14 12/31/14 06/30/15 12/31/15 Cash 139,857 139,857 139,857 139,857 139,857 139,857 ÷ 4.76654 (from Table 4) n=6, i=7.0% Effective Interest (7% × Outstanding Balance) .07 × 666,633 = .07 × 573,440 = .07 × 473,724 = .07 × 367,028 = .07 × 252,863 = .07 × 130,706 = = $139,857 installment payment Decrease in Debt Rounded 93,193 99,716 106,696 114,165 122,157 130,706 172,509 839,142 46,664 40,141 33,161 25,692 17,700 9,151 666,633 Outstanding Balance 666,633 573,440 473,724 367,028 252,863 130,706 -0 14-14 Installment Notes At the Purchase Date (January 1) Skill Graphics (Buyer/Issuer) Machinery 666,633 Notes payable 666,633 Hughes-Barker (Seller/Lender) Notes receivable Sales revenue 666,633 666,633 At the First Interest Date (June 30) Skill Graphics (Buyer/Issuer) Interest expense 46,664 Note payable 93,193 Cash 139,857 Hughes-Barker (Seller/Lender) Cash Notes receivable Interest revenue 139,857...
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This document was uploaded on 02/16/2014 for the course ACC 311 at Cal Poly Pomona.

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