Question

On January 1, 2020, a company buys a piece of equipment costing $666,633 with a 14% installment note. The note will be paid off with 6 semiannual payments over three years (2 payments a year for 3 years). Each payment is $139,857.
Required:
Prepare the installment note schedule

Answer 1

Answer:

Installment Note Schedule:

Period      Beginning Balance    Interest       Principal     Ending Balance

1. Year #1 $666,633.00 $46,664.31 $93,192.49 $573,440.51

2. Year #1 $573,440.51 $40,140.84 $99,715.97 $473,724.54

3. Year #2 $473,724.54 $33,160.72 $106,696.09 $367,028.45

4. Year #2 $367,028.45 $25,691.99 $114,164.81 $252,863.64

5. Year #3 $252,863.64 $17,700.45 $122,156.35 $130,707.29

6. Year #3 $130,707.29 $9,149.51 $130,707.29 $0.00

Explanation:

a) Data and Calculations:

Cost of equipment = $666,633

Rate of interest = 14%

Payment terms = semiannual payments over three years

Payment for each period = $139,857

Loan Amount  $666,633

Loan Term  3  years  0  months

Interest Rate  14

Compound  Semi-annually

Pay Back  Every 6 Months

Results:

Payment Every 6 Months = $139,856.80 = $139,857 approx.

Total of 6 Payments = $839,140.82

Total Interest = $172,507.82