Question: A partial amortization schedule for a note payable with interest paid annually that was issued on January 1, Year 1, is shown next: Accounting Period

A partial amortization schedule for a note payable with interest paid annually that was issued on January 1, Year 1, is shown next:

Accounting Period Principal balance January 1 Cash Payment Applied to Interest Applied to Principal
Year 1 $ 414,000 $ 53,500 $ 16,560 $ 36,940

Required:

  1. What is the annual rate of interest charged on this loan?
  2. Using the horizontal financial statements model, record the appropriate amounts for the following two events:
    1. (1) January 1, Year 1, issue of the note payable.
    2. (2) December 31, Year 1, payment on the note payable.

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