Recording Entries for an Installment Note Payable On January 1, 2020, a borrower signed a long-term note, face amount, $70,000; time to maturity, three years; stated rate of interest, 8%. The market rate of interest of 10% determined the cash received by the borrower. The note will be paid in three equal annual installments of $27,162 each December 31 (which is also the end of the accounting period for the borrower). Required a. Compute the cash received by the borrower and prepare a debt amortization schedule. Note: Round your answer to the nearest whole dollar.

A. $56,000

B. Jan 1, 2020 $70,000

Dec 31, 2020

$27,162$5,600-$21,562$48,438

Dec 31, 2021

$27,162$3,875-$23,287 $25,150

Dec 31, 2022

$27,162$2,012-$25,150$0

Total $81,486 $11,487, $70,000

B. Jan 1, 2020

Dr Cash $56,000

Dr Discount on Note Payable$14,000

Cr Note Payable $70,000

Dec 31, 2020

Dr Interest Expense $5,600

Dr Note Payable $21,562

Dr Cash $27,162

Dec 31, 2021

Dr Interest Expense Dr$3,875

Dr Note Payable Dr$23,287

Cr To Cash $27,162

Dec 31, 2022

Dr Interest Expense $2,012

Dr Note Payable $25,150

Cr To Cash $27,162

Explanation:

A. Computation for the cash received by the borrower

Cash received by the borrower=70000*8%/10%

Cash received by the borrower=$56,000

Therefore The Cash received by the borrower is $56,000

B.Preparation of a debt amortization schedule.

DEBT AMORTIZATION SCHEDULE

DateCashInterest ExpenseReduction in N.PCarrying Value

Jan 1, 2020 $70,000

Dec 31, 2020

$27,162$5,600-$21,562$48,438

($70,000*8%=$5,600)

($27,162-$5,600=21,562)

($70,000-$21,562=$48,438)

Dec 31, 2021

$27,162$3,875-$23,287$25,150

(8%*$48,438=$3,875)

($27,162-$3,875=$23,287)

($48,438-$23,287=$25,150)

Dec 31, 2022

$27,162$2,012-$25,150$0

(8%*$25,151=$2,012)

($27,162-$2,012=$25,150)

($25,151-$25,150)

Total

Jan 1, 2020 $70,000

Dec 31, 2020

$27,162$5,600-$21,562$48,438

Dec 31, 2021

$27,162$3,875-$23,287 $25,150

Dec 31, 2022

$27,162$2,012-$25,150$0

Total $81,486 $11,487, $70,000

b.Preparation of the required entries for the borrower for the issuance of the note on January 1, 2020, and the interest payments in 2020, 2021, and 2022

Jan 1, 2020

Dr Cash $56,000

Dr Discount on Note Payable$14,000

($70,000-$56,000)

Cr Note Payable $70,000

Dec 31, 2020

Dr Interest Expense $5,600

Dr Note Payable $21,562

Dr Cash $27,162

($21,562+$5,600)

Dec 31, 2021

Dr Interest Expense Dr$3,875

Dr Note Payable Dr$23,287

Cr To Cash $27,162

($3,875+$23,287)

Dec 31, 2022

Dr Interest Expense $2,012

Dr Note Payable $25,150

Cr To Cash $27,162

($2,012+$25,150)

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