Cucina Corp. signed a new installment note on January 1, 2018, and deposited the proceeds of $50,000 in its bank account. The note has a three-year term, compounds 5 percent interest annually, and requires an annual installment payment on December 31. Cucina Corp. has a December 31 year-end and adjusts its accounts only at year-end. Required:

Question Completion:

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 entries on (a) January 1, 2018, and December 31 of (b) 2018, (c) 2019, and (d) 2020.

3.If Cucina Corp.’s year-end were March 31, rather than December 31, prepare the adjusting journal entry it would make for this note on March 31, 2018?

Cucina Corp.

1. Annual Amortization Schedule  

Year   Beginning       Interest Expense    Repaid Principal   Ending Notes

       Notes Payable  on Notes Payable                                      Payable

1        $50,000.00         $2,140.23               $15,842.25         $34,157.68

2        $34,157.68         $1,329.68               $16,652.80          $17,504.84

3        $17,504.84             $477.71                $17,504.77          $0.00

2. (a) January 1, 2018

Debit Cash $50,000

Credit Installment Note Payable $50,000

To record the issuance of the installment note.

December 31 of

(b) 2018

Debit Interest Expense $2,140.23

Debit Installment Note Payable $15,842.25

Credit Cash $17,982.48

To record the first installment repayment, including interest.

(c) 2019

Debit Interest Expense $1,329.68

Debit Installment Note Payable $16,652.80

Credit Cash $17,982.48

To record the second installment repayment, including interest.

(d) 2020

Debit Interest Expense $477.71

Debit Installment Note Payable $17,504.77

Credit Cash $17,982.48

To record the third and final installment repayment, including interest.

3. (b) 2018

Debit Interest Expense $625

Credit Interest Payable $625

To accrue interest expense for the year ($50,000 * 5% * 3/12)

Explanation:

a) Data and Calculations:

Installment note payable obtained on January 1, 2018 = $50,000

Period of note payable = 3 years

Interest rate = 5% compounded annually

Annual interest payment = December 31

answer; proclamation of 1763;