On January 1, Year 1, Zero Company obtained a $52,000, four-year, 6.5% installment note from Regional Bank. The note requires annual payments of $15,179, beginning on December 31, Year 1. The December 31, Year 2 carrying amount in the amortization table for this installment note will be equal to
A) $26,000
B) $27,635
C) $21,642
D) $28,402

Question

Quizplus · Accepted Answer

The carrying amount of the installment note on December 31, Year 2, can be calculated by first determining the interest and principal components of the annual payments and then subtracting these from the initial loan amount over the two payment periods. The annual payment is $15,179.For Year 1:- Interest for Year 1 = $52,000 * 6.5% = $3,380- Principal repayment for Year 1 = $15,179 - $3,380 = $11,799- Remaining balance after Year 1 = $52,000 - $11,799 = $40,201For Year 2:- Interest for Year 2 = $40,201 * 6.5% = $2,613.07 (rounded)- Principal repayment for Year 2 = $15,179 - $2,613.07 = $12,565.93 (rounded)- Remaining balance after Year 2 = $40,201 - $12,565.93 = $27,635.07 (rounded)Therefore, the carrying amount on December 31, Year 2, is approximately $27,635, which matches choice B.

On January 1, Year 1, Zero Company Obtained a $52,000