Catter Company purchased equipment on November 15, 2008. The company paid $10,000 cash and borrowed the remaining balance of $90,000 from its bank for a period of 10 years at an annual interest rate of 12%. The note is payable in monthly installments of $1,250.
a.Prepare a partial amortization table showing the original balance of this note, and the allocation of the first two monthly payments between interest expense and the reduction in the note's unpaid balance.
b.Prepare journal entries on November 15 to record receipt of the note, December 15, January 15 to record the monthly payment, and on December 31 to record the adjusting entry.