Entries for Installment Note Transactions

On the first day of the fiscal year, Hammond Company borrowed $66,000 by giving a nine-year, 8% installment note to Vegas Bank. The note requires annual payments of $10,697, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $5,280 and principal repayment of $5,417.

Journalize the entries to record the following:

1. Issued the installment note for cash on the first day of the fiscal year.

2. Paid the first annual payment on the note. For a compound transaction, if an amount box does not require an entry, leave it blank.