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Ultra Power, Inc. engaged in the following transactions related to long term liabilities during 2011:

a. On March 1, the company borrowed \$50,000 for a machine. The loan is to be repaid in equal annual payments of \$6,793 at the end of each of the next 10 years (beginning February 28, 2012); the interest rate is 6%

b. On October 1, the company borrowed \$100,000 from the local credit union at an interst rate of 8%. The loan is for seven yhears, and Ultra power will make annual payments of \$19,207 on September 30 of each year.

Requirements

1. For each loan, prepare an amortization schedule for the first four payments. Show the reduction in principal and the interest expense for each payment.

2. What total interest explense related to these two loans would Ultra Power, Inc. Show on its income statement for the year ended December 31, 2011

3. How much interst payable would Ultra Power Inc, show on its balance sheet at December 31, 2011?

Document Preview:

Sheet3 Sheet2 Sheet1 A B C D E G H Name Section F End of Problem Principal Term in years Interest rate Principal balance Reduction in principal Interest expense Annual payment Payment Beginning bal. Machine a. Machine b. Annual payment date, February 28 Annual payment date, September 30 Total interest shown on income statement Total interest payable shown on balance sheet Problem 7-63A Part 1. Part 2. Part 3. Ultra Power, Inc Amount Formula 1 Formula 2 Formula 3 Formula 4 Reimers, Financial Accounting 3e 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00 Amount 13.00 2012.00 Amount 14.00 2013.00 Amount 15.00 2014.00 Amount 16.00 2015.00 Amount 17.00 18.00 19.00 20.00 21.00 22.00 23.00 Amount 24.00 2012.00 Amount 25.00 2013.00 Amount 26.00 2014.00 Amount 27.00 2015.00 Amount 28.00 29.00 30.00 31.00 \$0.00 32.00 33.00 34.00 35.00 \$0.00 36.00 Sheet3 Sheet2 Sheet1 A B C D E G H Name Section F End of Problem Principal Term in years Interest rate Principal balance Reduction in principal Interest expense Annual payment Payment Beginning bal. Machine a. Machine b. Annual payment date, February 28 Annual payment date, September 30 Total interest shown on income statement Total interest payable shown on balance sheet Problem 7-63A Part 1. Part 2. Part 3. Ultra Power, Inc Amount Formula 1 Formula 2 Formula 3 Formula 4 Reimers, Financial Accounting 3e 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00 Amount 13.00 2012.00 Amount 14.00 2013.00 Amount 15.00 2014.00 Amount 16.00 2015.00 Amount 17.00 18.00 19.00 20.00 21.00 22.00 23.00 Amount 24.00 2012.00 Amount 25.00 2013.00 Amount 26.00 2014.00 Amount 27.00 2015.00 Amount 28.00 29.00 30.00 31.00 \$0.00 32.00 33.00 34.00 35.00 \$0.00 36.00 ????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????

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