On January 1, 2021, Norwood borrows $200,000 cash from a bank by signing a five-year installment note bearing 8% interest. The note requires equal payments of $50,091 each year on December 31.

Required

1. Complete an amortization table for this installment note similar to the one in Exhibit 14.12. 

2. Prepare journal entries to record the note’s issuance and each of the first two payments.

Exhibit 14.12

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EXHIBIT 14.12 Payments Installment Note (A) (B) (C) (D) Credit Amortization Schedule (E) Debit Debit Interest Notes Ending Expense 8% x (A) Payable Cash Balance Beginning Balance + Period Ending Date (D) – (B) (computed) (А) - (C) Excel: Installment note payments. (1) 12/31/2021 $60,000 $4,800 $ 18,482 $23,282 $41,518 A B (2) 12/31/2022 ... 41,518 21,557 1 Rate per period 2 Number of periods 8% 3,321 19,961 23,282 (3) 12/31/2023 21,557 1,725 21,557 23,282 3 Loan amount $60,000 $9,846 $60,000 $69,846 Loan payments =-PMT(B1,B2,B3)=$23,282 Equal Cash Payments Decreasing Accrued Increasing Principal Component Interest Excel: Principal portion of payments. A B 1 Rate per period $4,800 $18,482 8% 2021 | Interest 2 Number of periods 3 * 2022 $3,321 $19,961 3 Loan amount $60,000 Principal Period Principal 2023 $1,725 $21,557 4 1 $5,000 $15,000 $25,000 2 3 *Table B.3 in Appendix B is used to compute the dollar amount of three payments that equal the initial note balance of $60,000 at 8% =-PPMT(B1.A5,82,B3)-$18,482- interest. We go to Table B.3, row 3, and across to the 8% column, where the present value factor is 2.5771. The dollar amount is then computed by solving the following equation. The amount is computed by dividing $60,000 by 2.5771, yielding $23,282. =-PPMT(B1,A6,B2,B3)=$19,961- =-PPMT(B1,A7,82,B3-$21,557- Table Present Value Factor Dollar Amount Present Value В.3 2.5771 ? = $60,000 Activate Win End of Year