Installment notes

On November 1, 2007, Norwood borrows $540,000 cash from a bank by signing a six-year installment not bearing 9% interest. The note requires equal total payments each year on October 31.

1. Compute the total amount of each installment payment. Use the present value table
2. Compute an amortization table for this installment note similar

Period end date Beg Balance. Debit interest Exp. Debit notes payable Credit cash End Balance

10/31/2008
10/31/2009
10/31/2010
10/31/2011
10/31/2012

3. Prepare the journal entries in which Norwood records the following:

A. accrued interest as of December 31, 2007 (the end of its annual reporting period)
B. the first annual payment on the note

Solution Summary

The solution explains how to calculate the installment amount, make an amortization table and pass the required journal entries