Prepare journal entries to record instalment note payable

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Culver Manufacturing Inc. intends to finance the acquisition of new manufacturing equipment that costs $155,000 by issuing a 5-year, 3.50% note payable. The note would be issued on January 1, 2021. Culver's year end is December and the note would require annual payments on December 31. The finance company has given Culver the choice of making blended payments of $34,330, or making fixed payments of $31,000 plus interest

Assume now that the company has chosen to make fixed principal payments plus interest to repay the instalment note payable (i.e., the loan). Answer the questions below accordingly.

Problem 1) Prepare an instalment payment schedule for the note using the fixed principal repayment provided in the question above. ($155,001.75 )

Problem 2) Prepare journal entries to record 1) the instalment note payable on the date of issue, and 2) the entry for the first instalment payment

Problem 3) Discuss which repayment scheme results in more interest being paid over the term of the loan. Explain why this has occurred.

Reference no: EM132998740

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