Journalizing Installment Notes

On the first day of the fiscal year, a company issues $$71,000,11\%,$ six$-$year installment notes that have annual payments of

$$17,783.$ The first note payment consists of $$7,810$ of interest and $$9,973$ of principal repayment.

a$.$ Journalize the entry to record the issuance of the installment notes. If an amount box does not require an entry, leave it

blank.

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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.

b$.$ Journalize the first annual note payment. If an amount box does not require an entry, leave it blank.

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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.