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Example of Amortization Schedule for a Note with Equal Total Payments

Example of Amortization Schedule for a Note with Equal Total Payments. The following example is based on information from Exercise 14-11 in your textbook. This problem is assigned as Question 1 in Homework Manager. Problem Data:. Requirements:. Before proceeding, click below

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Example of Amortization Schedule for a Note with Equal Total Payments

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  1. Example of Amortization Schedule for a Note with Equal Total Payments The following example is based on information from Exercise 14-11 in your textbook. This problem is assigned as Question 1 in Homework Manager.

  2. Problem Data: Requirements:

  3. Before proceeding, click below for a printable copy of the example so that you can work along with the presentation. Print the Problem and Schedule

  4. Compute the Equal Total Payments Using Table B.3, find the present value factor for four years at 9% interest (from problem data) by reading across from the period and down from the rate.

  5. Compute the Equal Total Payments Using Table B.3, find the present value factor for four years at 9% interest (from problem data) by reading across from the period and down from the rate.

  6. Compute the Equal Total Payments Using Table B.3, find the present value factor for four years at 9% interest (from problem data) by reading across from the period and down from the rate.

  7. Compute the Equal Total Payments The note payment is computed by dividing the principal by the present value factor. Principal: $100,000 / PV Factor: 3.3872 = Payment: $29,523 (rounded to the nearest whole dollar)

  8. Complete the Amortization Schedule • Enter the principal in the Beginning Balance blank.

  9. Complete the Amortization Schedule • Enter the principal in the Beginning Balance blank. 100,000

  10. Complete the Amortization Schedule • Enter the principal in the Beginning Balance blank. • Calculate Interest Expense by multiplying the beginning balance by the interest rate stated on the note ($100,000 X .07) 7,000 100,000

  11. Complete the Amortization Schedule • Enter the principal in the Beginning Balance blank. • Calculate Interest Expense by multiplying the beginning balance by the interest rate stated on the note ($100,000 X .07) • Enter the equal total payment amount in the Credit Cash blank (calculated in Slide 7.) 29,523 100,000 7,000

  12. Complete the Amortization Schedule Enter the principal in the Beginning Balance blank. Calculate Interest Expense by multiplying the beginning balance by the interest rate stated on the note ($100,000 X .07) Enter the equal total payment amount in the Credit Cash blank. Determine the amount of principal reduction to be debited to Notes Payable by finding the difference between the cash payment and the amount charged to interest ($29,523 - $7,000). 22,523 29,523 100,000 7,000

  13. Complete the Amortization Schedule Enter the principal in the Beginning Balance blank. Calculate Interest Expense by multiplying the beginning balance by the interest rate stated on the note ($100,000 X .07) Enter the equal total payment amount in the Credit Cash blank. Determine the amount of principal reduction to be debited to Notes Payable by finding the difference between the cash payment and the amount charged to interest ($29,523 - $7,000). Calculate the Ending (principal) Balance as Beginning Balance less the principal reduction debited to Notes Payable ($100,000 - $22,523) and place the ending balance for this period in the Beginning Balance blank for the next period. 22,523 29,523 100,000 7,000 77,477 77,477

  14. Complete the Amortization Schedule Enter the principal in the Beginning Balance blank. Calculate Interest Expense by multiplying the beginning balance by the interest rate stated on the note ($100,000 X .07) Enter the equal total payment amount in the Credit Cash blank. Determine the amount of principal reduction to be debited to Notes Payable by finding the difference between the cash payment and the amount charged to interest ($29,523 - $7,000). Calculate the Ending (principal) Balance as Beginning Balance less the principal reduction debited to Notes Payable ($100,000 - $22,523) and place the ending balance for this period in the Beginning Balance blank for the next period. Repeat steps 2-5 through year 2010. 22,523 29,523 100,000 7,000 77,477

  15. Complete the Amortization Schedule See if you can complete the note amortization schedule through year 2010 on the problem sheet you printed out. Round your interest expense to the nearest whole dollar. Check your answers on the following slide.

  16. Complete the Amortization Schedule 24,100 29,523 53,377 77,477 5,423 53,377 3,736 29,523 22,523 29,523 100,000 100,000 7,000 77,477

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