P10-13A Grace
Herron has just approached a venture capitalist for financing for her new
business venture, the development of a local ski hill. On July 1, 2013, Grace
was loaned $198,000 at an annual interest rate of 7%. The loan is repayable
over 5 years in annual installments of $48,290, principal and
interest, due each June 30. The first payment is due June 30, 2014. Grace uses
the effective-interest method for amortizing debt. Her ski hill company’s
year-end will be June 30.
Prepare
an amortization schedule for the 5 years, 2013–2018. (Round answers to 0 decimal places, e.g. 125.)
|
Period
|
Cash
Payment |
Interest
Expense |
Principal
Reduction |
Balance
|
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|
July 1, 2013
|
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|
June 30, 2014
|
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|
June 30, 2015
|
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|
June 30, 2016
|
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|
June 30, 2017
|
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|
June 30, 2018
|
*
|
* Amount
may be off due to rounding.
Prepare
all journal entries for Grace Herron for the first 2 fiscal years ended June
30, 2014, and June 30, 2015. (Round answers to 0 decimal places, e.g. 125. Credit account titles are
automatically indented when amount is entered. Do not indent manually.)
|
Date
|
Account
Titles and Explanation
|
Debit
|
Credit
|
|
July 1/13
|
|||
|
June 30/14
|
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|
June 30/15
|
Show the
balance sheet presentation of the note payable as of June 30, 2015. (Hint:
Be sure to distinguish between the current and long-term portions of the note.)
(Round answers to 0
decimal places, e.g. 125.)
|
GRACE
HERRON
Balance Sheet (Partial) June 30, 2015 |
|||
SOLUTION
(a)
|
Period
|
Cash
Payment
(A)
|
Interest
Expense (B) = (D) X 7% |
Principal
Reduction (C) = (A) – (B) |
Balance
(D) = (D) – (C)
|
|
July 1, 2013
|
|
|
|
$198,000
|
|
June 30, 2014
|
$48,290
|
$13,860
|
$34,430
|
163,570
|
File name: P10-13A Grace Herron .doc File type: .doc PRICE: $7
