King City Inc. manufactures machine tools. The production planner who oversees the production of two of King City’s machines needs to determine how many of each to produce this month…..
prepare the journal entry for the first payment.
Winter Spring Company (WSC) patented and successfully test-marketed a new product. To expand its ability to produce and market the new product, WSC needs to raise $800,000 of financing. On January 1, 2011, the company obtained the money in two ways: a. WSC signed a $400,000, 10% installment note to be repaid with five equal annual installments to be made on December 31 of 2011 through 2015. b. WSC issued five-year bonds with a par value of $400,000. The bonds have a 12% annual contract rate and pay interest on June 30 and December 31. The bonds’ annual market rate is 10% as of January 1, 2011. Required 1. For the installment note: (a) compute the size of each annual payment NOTE: To find the cash installments/annual payment, the formula is (Note balance/Annuity factor). Remember we find the annuity factor in one of the tables below. (b) prepare an amortization table Use this format for your amortization table Annual Ending Period (a) Beginning balance (b) Interest Expense + (c) Debit Notes Payable = (d) Credit (e) Ending balance 0 (c) prepare the journal entry for the first payment.