account 2301

Long-Term Liabilities

Using Excel for long-term notes payable amortization schedule

Patrick’s Delivery Services is buying a van to help with deliveries. The cost of the vehicle is $35,000, the interest rate is 6%, and the loan is for three years. 

The van is to be repaid in three equal installment payments. Payments are due at the end of each year.

Use the blue shaded areas on the ENTER-ANSWERS tab for inputs.

Always use cell references and formulas where appropriate to receive full credit. If you copy/paste from the Instructions tab, you will be marked wrong.

Requirements

Possible Points

1

Complete the data table.  Enter all amounts as positive values. Do not use a minus sign or parentheses for any values.

3

2

Using the present value of an ordinary annuity table, calculate the payment amount and complete the amortization schedule.   

20

Use the effective interest amortization method.  Enter all amounts as positive values. Do not use a minus sign or parentheses for any values.

a.

Calculate the loan payment by dividing the loan amount by the appropriate present value factor.

b.

Round values to two decimal places.

Calculate the interest expense in the third year as the loan payment minus the loan balance at the beginning of the third year.

c.

Use absolute cell references and relative cell references in formulas. 

Use absolute cell references C6 and C19 only to calculate interest expense and payment calculations.

3

Using the Excel PMT function, calculate the payment amount and complete the amortization schedule. 

20

Use the effective interest amortization method.

a.

The PMT function calculates a payment amount that results in a negative number. 

Reverse this to a positive number for calculations in the amortization schedule.

b.

Round values to two decimal places.

Calculate the interest expense in the third year as the loan payment minus the loan balance at the beginning of the third year.

c

Use absolute cell references and relative cell references in formulas. 

Use absolute cell references C6 and C39 only to calculate interest expense and payment calculations.

Excel Skills

1

Formulas using both absolute and relative cell references.

2

PMT function

Excel Hints

The PMT function uses the interest rate, the number of periods, and the loan amount (in that order).  

To calculate the payment amount for a loan of $3,000 at 4% for 5 years, the formula would be 

=PMT(4%, 5, 3000)

($673.88)

Saving & Submitting Solution

1

Save file to desktop.

a.

Create folder on desktop, and label COMPLETED EXCEL PROJECTS

2

Upload and submit your file to Canvas to be graded.