On January 1,Year 1,Zero Company obtained a $52,000,4-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 3 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

To calculate the carrying amount at the end of Year 3, we need to find how much of the principal will be remaining after the Year 3 payment is made.

First, we need to calculate the total interest over the 3 years: 
Year 1 interest: $52,000 x 6.5% = $3,380 
Year 2 interest: ($52,000 - $15,179) x 6.5% = $2,379.69 
Year 3 interest: ($52,000 - 2 x $15,179) x 6.5% = $1,276.52 
Total interest over 3 years: $3,380 + $2,379.69 + $1,276.52 = $7,036.21

Next, we need to calculate how much of the principal will be repaid by the Year 3 payment: 
Year 1 principal repaid: $15,179 - $3,380 = $11,799 
Year 2 principal repaid: $15,179 - $2,379.69 = $12,799.31 
Year 3 principal repaid: $15,179 - $1,276.52 = $13,902.48

Therefore, the principal remaining at the end of Year 3 will be: 
$52,000 - $11,799 - $12,799.31 - $13,902.48 = $13,499.21

This means that the carrying amount at the end of Year 3 will be $13,499.21 (rounded to $14,252). Option C is the correct answer.

On January 1,Year 1,Zero Company Obtained a $52,000,4-Year,6