Amortization of a long term loan
A partial amortization schedule for a five year note payable that Puro Co. issued on January 1, 2010, is shown here:
|
Accounting |
Principal |
Cash |
Applied to |
Applied to |
|
Period |
Balance January 1 |
Payment |
Interest |
Principal |
|
2010 |
$100,000 |
$25,046 |
$8,000 |
$17,046 |
|
2011 |
82,954 |
25,046 |
6,636 |
18,410 |
Required
a. What rate of interest is Puro Co. paying on the note?
b. Using a financial statements model like the one shown below, record the appropriate amounts for the following two events.
(1) January 1, 2010, issue of the note payable.
(2) December 31, 2010, payment on the note payable.
|
Event |
Assets |
= |
Liab. |
+ |
Equity |
Rev. |
Exp. |
= |
Net Inc. |
Cash Flow |
|
|
1 |
c. If the company earned $75,000 cash revenue and paid $35,000 in cash expenses in addition to the interest in 2010, what is the amount of each of the following?
(1) Net income for 2010.
(2) Cash flow from operating activities for 2010.
(3) Cash flow from financing activities for 2010.
d. What is the amount of interest expense on this loan for 2012?