Entries forInstallment NoteTransactions

On January 1, Year 1, Luzak Company issued a $26,000, 4-year, 12% installment note to McGee Bank. The note requires annual payments of $8,560, beginning on December 31, Year 1.

Journalize the entries to record the following:

Year 1Jan.1 Issued the note for cash at its face amount.

Dec.31Paid the annual payment on the note, which consisted of interest of $3,120 and principal of $5,440.

Year 4 Dec. 31 Paid the annual payment on the note, including $917 of interest. The remainder of the payment reduced the principal balance on the note. Issued the note for cash at its face amount. Year 1, Jan. 1 Paid the annual payment on the note, which consisted of interest of $3,120 and principal of $5,440. For a compound transaction, if an amount box does not require an entry, leave it blank. Year 1, Dec. 31 Paid the annual payment on the note, including $917 of interest. The remainder of the payment reduced the principal balance on the note. For a compound transaction, if an amount box does not require an entry, leave it blank. Year 4, Dec. 31