Question

Zarina Corp. signed a new installment note on January 1, 2018, and deposited the proceeds of $15,000 in its bank account. The note has a two-year term, compounds 4 percent interest annually, and requires an annual installment payment on December 31. Zarina Corp.
Required:
1. Use an online application, such as the loan calculator with annual payments at mycalculators.com, to generate an amortization schedule. Enter that information into an amortization schedule with the following headings: Year, Beginning Notes Payable, Interest Expense, Repaid Principal on Notes Payable, and Ending Notes Payable.
2. Prepare the journal entry on January 1, 2018, the adjusting journal entry to accrue interest on March 31, 2018. Assuming the journal entry from requirement 3 also is recorded on June 30, September 30, and December 31, 2018, prepare the journal entry to record the first annual installment payment on December 31, 2018.
3. Calculate the amount of interest expense that should be accrued for the quarter ended March 31, 2019.

Answer 1

Answer:

1)

the annual installment = $7,952.94

total Interest paid = $905.88

Year     Beginning            Interest           Repaid            Ending

            Notes Payable     Expense         Principal         Notes Payable

1            $15,000               $600               $7,352.94      $7,647.06

2           $7,647.06           $305.88           $7,647.06      $0

2)

March 31, 2018, accrued interests on notes payable

Dr Interest expense 150

    Cr Interest payable 150

June 30, 2018, accrued interests on notes payable

Dr Interest expense 150

    Cr Interest payable 150

September 30, 2018, accrued interests on notes payable

Dr Interest expense 150

    Cr Interest payable 150

December 31, 2018, accrued interests on notes payable

Dr Interest expense 150

    Cr Interest payable 150

December 31, 2018, first installment on notes payable

Dr Notes payable 7,352.94

Dr Interest payable 600

    Cr Cash 7,952.94

3)

March 31, 2019, accrued interests on notes payable

Dr Interest expense 76.47

    Cr Interest payable 76.47