ACCT-2003-42744 Packet 20

ACCT-2003-42744 Packet 20

Semester Case – Cowboy Ice Cream, Inc. (CIC)

Last class period we discussed a possible expansion by CIC whereby they would purchase a building, land, and new equipment. In order to finance such an expansion CIC would borrow $800,000. CIC is currently considering possible options for this borrowing.Prepare amortization schedules for each of the following, rounding all computations to the nearest whole dollar. Assume 8% interest applies to each option and all borrowings would originate on January 1, 2019.

Option #1:

Issue a note with the principal and interest due in 18 months. Interest and principal are payable in cash on June 30, 2020.

Option #2

Issue a note with the principal due in 5 years with interest payable annually on December 31.

Option #3

Issue a note to repay $160,000 of the principal due each year on December 31 for 5 years along with the annual interest due.

Option #4

Issue a note to make equal annual payments of $200,365 each year on December 31 for 5 years.

Option #1

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