Fully Amortizing Installment Note Payable

question 70

Essay

Fully amortizing installment note payable
On October 31,2015 Ronald signed a 2-year installment note in the amount of $50,000 in conjunction with the purchase of equipment.This note is payable in equal monthly installments of $2,354,which include interest computed at an annual rate of 12%.The first monthly payment is made on November 30,2015.This note is fully amortizing over 24 months.
Complete the amortization table for the first two payments by entering the correct dollar amounts in the blank spaces provided.In addition,answer the questions that follow. (a)With respect to this note,Ronald's 2015 income statement includes interest expense of $_______________,and Ronald's balance sheet at December 31,2015,includes a total liability for this note payable of ______________.(Do not separate into current and long-term portions.)
(b)The aggregate monthly cash payments Ronald will make over the 2-year life of the note payable amount to $_______________.
(c)Over the 2-year life of the note,the amount Ronald will pay for interest amounts to $_______________.

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Definitions:

Direct Materials

Raw materials that are directly incorporated into a finished product and can be easily traced to it.

Rate Variance

Refers to the difference between an actual rate and a standard or expected rate, often used in budgeting and financial analysis to understand variances in performance.

Direct Labor Hours

The total hours of labor directly involved in the manufacturing of a product, directly tied to the production process.

Direct Materials Price Variance

The cost associated with the difference between the actual price and the standard price of direct materials multiplied by the actual quantity of direct materials used in producing a commodity.