Entries for installment note transactions

On January $1$ of Year $1,$ Bryson Company obtained a $$63,000,4-$year, $12\%$ installment note from Campbell Bank. The note requires annual payments of $$20,742,$ beginning on December $31$ of Year $1.$

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a$.$ Prepare a table for this installment note, similar to the one presented in Exhibit $4.$ Enter all amounts as positive numbers. $($Note: Due to rounding, the Year $4$ Interest expense is provided.$)$ Round the computation of the interest expense to the nearest whole dollar. If an amount box does not require an entry, leave it blank.

Amortization of Installment Notes

For the Year

Ending Dec. $31$ January $1$

Carrying Amount Note Payment

$($Cash Paid$)$ Interest Expense

$(12\%$ of January $1$

Note Carrying Amount$)$ Decrease in

Notes Payable December $31$

Carrying Amount

Year $1$ fill in the blank $1$ of $23$$

$63,000$

fill in the blank $2$ of $23$$

$20,742$

fill in the blank $3$ of $23$$

$7,560$

fill in the blank $4$ of $23$$

$13,182$

fill in the blank $5$ of $23$$

$49,818$

Year $2$ fill in the blank $6$ of $23$

$49,818$

fill in the blank $7$ of $23$

$20,742$

fill in the blank $8$ of $23$

$5,978$

fill in the blank $9$ of $23$

$14,764$

fill in the blank $10$ of $23$

$35,054$

Year $3$ fill in the blank $11$ of $23$

$35,054$

fill in the blank $12$ of $23$

$20,742$

fill in the blank $13$ of $23$

$4,206$

fill in the blank $14$ of $23$

$16,536$

fill in the blank $15$ of $23$

$18,518$

Year $4$ fill in the blank $16$ of $23$

$18,518$

fill in the blank $17$ of $23$

$20,742$

fill in the blank $18$ of $23$

$2,222$

fill in the blank $19$ of $23$

$18,520$

fill in the blank $20$ of $23$

$0$

Total fill in the blank $21$ of $23$$

$63,000$

fill in the blank $22$ of $23$$

$12$

fill in the blank $23$ of $23$$

$4$

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b$.$ Journalize the entries for the issuance of the note and the four annual note payments. If an amount box does not require an entry, leave it blank.

DateAccountDebitCredit

Year $1$ Jan. $1$

Cash

$63,000$

Notes Payable

$63,000$

Year $1$ Dec. $31$

Interest Expense

Notes Payable

Cash

Year $2$ Dec. $31$

Interest Expense

Notes Payable

Cash

Year $3$ Dec. $31$

Interest Expense

Notes Payable

Cash

Year $4$ Dec. $31$

Interest Expense

Notes Payable

Cash

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The cash payment is the same in each year. The interest and principal repayment, however, change each year. This is because the carrying amount $($book value$)$ of the note decreases each year as principal is repaid, which decreases the interest.

After the final payment, the carrying amount on the note is zero, indicating that the note has been paid in full.

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c$.$ How will the annual note payment be reported in the Year $1$ income statement?

Interest expense

of fill in the blank $1$ of $1$$

would be reported on the income statement.

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