Term loan
1/1/X1, XYZ borrowed 100,000 from a bank. It agreed to pay 8,000 annual interest and repay the principal on 12/31/X5.
1/1/X1 | 1.1.X1 |
|
|
|
Cash in bank |
100,000 |
||
|
Long-term loan |
|
100,000 |
12/31/X1 | 31.12.X1 |
|
|
|
Interest expense |
8,000 |
|
|
|
Cash in bank |
|
8,000 |
12/31/X5 | 31.12.X5 |
|
|
|
Interest expense |
8,000 |
|
|
Long-term loan |
100,000 |
|
|
|
Cash in bank |
|
108,000 |
Same facts except XYZ made quarterly interest accruals.
12/31/X1 | 31.12.X1 |
|
|
|
Interest expense |
2,000 |
||
|
Accrued interest |
|
2,000 |
12/31/X5 | 31.12.X5 |
|
|
|
Long-term loan |
100,000 |
|
|
Interest expense |
2,000 |
|
|
Accrued interest |
6,000 |
|
|
|
Cash in bank |
|
108,000 |
Serial loan
1/1/X1, XYZ borrowed 100,000 agreeing to make 5 annual payments of 25,046.
1/1/X1 | 1.1.X1 |
|
|
|
Cash in bank |
100,000 |
|
|
|
Long-term bank loan |
|
100,000 |
12/31/X1 | 31.12.X1 |
|
|
|
Long-term bank loan |
|
||
Interest expense |
8,000 |
|
|
|
Cash in bank |
|
25,046 |
|
P |
Loan balance |
Interest rate |
Interest expense |
Payment |
Principal |
|
A |
B = B(B+1) - F |
D = B x C |
E |
F = E - D |
|
|
1 |
100,000 |
8.00% |
8,000 |
25,046 |
17,046 |
|
2 |
82,954 |
8.00% |
6,636 |
25,046 |
18,409 |
|
3 |
64,545 |
8.00% |
5,164 |
25,046 |
19,882 |
|
4 |
44,663 |
8.00% |
3,573 |
25,046 |
21,473 |
|
5 |
23,190 |
8.00% |
1,855 |
25,046 |
23,190 |
|
|
|
|
|
|
100,000 |
|
|
|||||
8.00% = RATE(5,-25046,100000,0)
12/31/X5 | 31.12.X5 |
|
|
|
Long-term bank loan |
23,190 |
|
|
Interest expense |
1,855 |
|
|
|
Cash in bank |
|
25,046 |
Same facts except XYZ made quarterly interest accruals.
1/31/X1 | 31.1.X1 |
|
|
|
Interest expense |
2,000 |
|
|
|
Accrued interest |
|
2,000 |
12/31/X1 | 31.12.X1 |
|
|
|
Long-term loan |
17,046 |
|
|
Interest expense |
2,000 |
|
|
Accrued interest |
6,000 |
|
|
|
Cash in bank |
|
25,046 |
1/31/X5 | 31.1.X5 |
|
|
|
Interest expense |
464 |
|
|
|
Accrued interest |
|
464 |
12/31/X5 | 31.12.X5 |
|
|
|
Long-term loan |
23,190 |
|
|
Interest expense |
464 |
|
|
Accrued interest |
1,391 |
|
|
|
Cash in bank |
|
25,046 |
Same facts except XYZ made quarterly interest accruals using an effective interest method and paid on the 1st.
3/31/X1 | 31.3.X1 |
|
|
|
Interest expense |
2,245 |
|
|
Long-term loan |
|
||
|
Accrued interest |
|
2,245 |
|
Current portion of long-term debt |
|
4,016 |
|
P |
Loan balance |
Interest rate |
Interest expense |
Payment |
Principal |
|
A |
B = B(B+1) - F |
D = B x C |
E = 25,046 ÷ 4 |
F = E - D |
|
|
1 |
100,000 |
2.245% |
2,245 |
6,261 |
4,016 |
|
2 |
95,984 |
2.245% |
2,155 |
6,261 |
4,006 |
|
- |
- |
- |
- |
- |
- |
|
4 |
87,679 |
2.245% |
1,969 |
6,261 |
4,293 |
|
- |
- |
- |
- |
- |
- |
|
19 |
12,113 |
2.245% |
272 |
6,261 |
5,989 |
|
20 |
6,124 |
2.245% |
138 |
6,261 |
6,124 |
|
|
|
|
|
|
100,000 |
|
|
|||||
2.24535% = RATE(20,-6261,100000,0,0)
Note: since XYZ actually made annual loan repayments, so it could
make quarterly accruals, it needed to determine this implicit quarterly
rate instead of merely scaling down the annual rate: 1.943% = (1+8%)1÷4
- 1.
12/31/X1 | 31.12.X1 |
|
|
|
Interest expense |
1,969 |
|
|
Long-term loan |
4,293 |
|
|
|
Accrued interest |
|
1,969 |
|
Current portion of long-term debt |
|
4,293 |
1/1/X2 | 1.1.X2 |
|
|
|
Accrued interest |
8,432 |
|
|
Current portion of long-term debt |
16,614 |
|
|
|
Cash in bank |
|
25,046 |