On January 1, 2011, 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, 2011. The December 31, 2012 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

To calculate the carrying amount at the end of the second year, we need to find the remaining balance after the second payment is made.

First, we need to find the amount of interest expense and the amount of principal repayment included in the second payment:

Interest expense = Carrying amount at beginning of year x interest rate = $52,000 x 6.5% = $3,380

Principal repayment = Total payment - interest expense = $15,179 - $3,380 = $11,799

Next, we can calculate the carrying amount at the end of the second year:

Carrying amount at beginning of year = $52,000 - $11,799 = $40,201

Carrying amount at end of year 2 = Carrying amount at beginning of year - principal repayment = $40,201 - $11,799 = $28,402

Therefore, the correct answer is B) $27,635.

On January 1, 2011, Zero Company Obtained a $52,000, Four-Year