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, 2013 carrying amount in the amortization table for this installment note will be equal to:
A) $0
B) $13,000
C) $14,252
D) $16,603

Question

Quizplus · Accepted Answer

Using the amortization table:

Year 1: 
Beginning balance = $52,000
Payment = $15,179
Interest expense = $3,380 ($52,000 * 6.5%)
Principal reduction = $11,799 ($15,179 - $3,380)
Ending balance = $40,201

Year 2: 
Beginning balance = $40,201
Payment = $15,179
Interest expense = $2,613 ($40,201 * 6.5%)
Principal reduction = $12,566 ($15,179 - $2,613)
Ending balance = $27,635

Year 3: 
Beginning balance = $27,635
Payment = $15,179
Interest expense = $1,795 ($27,635 * 6.5%)
Principal reduction = $13,384 ($15,179 - $1,795)
Ending balance = $14,251

Therefore, the carrying amount on December 31, 2013 will be $14,251, which is answer choice C.

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