The amounts to be paid on principal , Accounting Basics

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On January 1, 2012, Muller Co. borrowed cash from Washington Valley Bank by issuing a $100,000 face value 3-year installment note payable that carried a 7% interest rate. The note is to be repaid by making yearly cash payments of $38,105, which contains both principal and interest. The payments are to be made on December 31 of every year.

Required:

a) Prepare an amortization schedule for the term of the loan, showing the amounts to be paid on principal and interest for 2012, 2013, and 2014 and the loan balance at the end of every year.

b) What amount of interest expense will be displayedon the 2013 income statement?

c) What amount of liability for the note will be displayed on the balance sheet on December 31, 2013?


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