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On January 1, 2021, Strato Corporation borrowed $2 million from a local bank to construct a new building over the next three years. The loan will be paid back in three equal installments of $776,067 on December 31 of each year. The payments include interest at a rate of 8%.
1. Record the receipt of cash from the issue of note payable.
2. Prepare an amortization schedule over the three-year life of the installment note.

Respuesta :

Once the debt principal has now been completely amortized, the ending balance is $0. (repaid).

What does amortization mean?

Amortization often describes the process of reducing the value of an intangible asset or a loan. Lenders, including financial institutions, present a loan payback schedule based on an exact maturity date using amortization schedules.

Is amortization a good thing?

Small businesses benefit from amortization because each time they make a payment, interest and principle are included in a clear, predetermined amount. An amortized loan enables the principal and interest to be spread out over time, creating a more sustainable repayment schedule.

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