The following transactions apply to Sumit Corporation for the year XXX1, its first year of operations: (i) Received $100,000 cash in exchange for issuance of common stock on January 1, Year XXX1. (ii) On January 1, Year XXX1, Sumit Co. secured a $200,000, 10 – year installment loan from First Bank. The interest rate was 6% and the loan is to be repaid in ten equal installments. The payment is to be made on December 31 of each year for the next ten years beginning from December 31, Year XXX1 with annual payments of $27,174. (iii) On March 1, Year XXX1, Sumit purchased land for $60,000 (iv) During the year XXX1, Sumit provided services to customers for $120,000 cash. (v) During the year XXX1, Sumit paid other operating expenses of $85,000 in cash. (vi) On December 31, Year XXX1, Sumit paid $27,174 to First Bank towards the note.
Required:
a) Prepare an amortization schedule for the $200,000 note for the first three years (i.e. show the amount applied towards interest and the amount applied to the principal for each of the three payments that Sumit Co. makes to Best Bank during Years XXX1, XXX2, XXX3). Round off all calculations to the nearest dollar.
b) Prepare an income statement for the Year XXX1 and a balance sheet as of December 31, Year XXX1
c) Calculate the value of note payable reported in the balance sheet prepared on December 31, Year XXX3.