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    girlygoth91's Avatar
    girlygoth91 Posts: 6, Reputation: 1
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    #1

    Feb 19, 2012, 10:52 AM
    Calculating Note Payable
    On January 1, 2008, ABC Company borrowed $150,000 from the bank. The loan is a 10-year note payable
    That requires annual payments of $24,500 every December 31, beginning December 31, 2008. Assume the
    Loan has a 10% annual interest rate.

    Calculate the amount of the note payable at December 31, 2009 that would be classified as a long-term
    Liability.
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #2

    Feb 19, 2012, 11:09 AM
    The first thing you need to do is calculate your remaining principal balance at the end of 2009.

    So for 2008 you need to calculate the interest portion of your payment. This is simply your beginning account balance times 10%. Now subtract this amount from the payment amount to get the principal portion of the payment. Now subtract the principal portion of the payment from your account balance to get the next year beginning account balance.

    For 2009 you need to repeat the process above with the beginning 2009 account balance to get your beginning 2010 account balance.

    Now you need to repeat the process for the year 2011. Your beginning account balance for 2012 will be your long-term liability amount.
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