Sharapovich Inc. borrowed \$50,000 from Kerber Bank and signed a 5-year note payable stating the interest rate was 5% compounded annually. Sharapovich Inc. will make payments of \$11,548.74 at the end of each year. Prepare an amortization table showing the principal and interest in each payment.

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 13, Problem 1EB
Textbook Problem
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Sharapovich Inc. borrowed \$50,000 from Kerber Bank and signed a 5-year note payable stating the interest rate was 5% compounded annually. Sharapovich Inc. will make payments of \$11,548.74 at the end of each year. Prepare an amortization table showing the principal and interest in each payment.

To determine

Concept introduction:

Notes payable:

Notes payable is defined as a liability that represents the loan that is taken by the business. It is usually issued by a debtor to the creditors for the liability of payments for issuing various supplies. The balance in the Notes Payable account represents the amounts that are to be paid.

To prepare:

The amortization table.

Explanation of Solution

The amortization table is prepared as follows:

• The interest expense for each period is calculated as 5% of the beginning balance of the note for that period.
• The principal repayment is the difference between the Cash installment paid and the interest expense for a period...
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