On January 1, the first day of the fiscal year, Shiller Company borrowed $86,000 by giving a seven year, 8 installment note to Soros Bank The note requires annual payments of $16,518, with the first payment occurring on the last day of the fiscal year The first payment consists of interest of $6,880 and principal repayment of $9,638 Required A Journalize the entries to record the following transactions Refer to the Chart of Accounts for exact wording of account titles 1 Issued the installment note for cash on the first day of the fiscal year 2 Paid the first annual payment on the note B Explain how the notes payable would be reported on the balance sheet at the end of the first year CHART OF ACCOUNTS Shiller Company General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Merchandise Inventory 141 Office Supplies 142 Store Supplies 151 Prepaid Insurance 191 Land 192 Store Equipment 193 Accumulated Depreciation Store Equipment 194 Office Equipment 195 Accumulated Depreciation Office Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid In Capital in Excess of Par Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid In Capital in Excess of Par Preferred Stock 331 Paid In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary REVENUE 410 Sales 610 Interest Revenue 611 Gain on Redemption of Bonds PAGE 10 JOURNAL DATE DESCRIPTION POST REF DEBIT CREDIT 1 2 3 4 5 B Explain how the notes payable would be reported on the balance sheet at the end of the first year Notes payable are reported as liabilities on the balance sheet The portion of the note payable that is due within (Three months OR Six Months OR One year) is reported as a (Contra liability OR current liability OR long term liability) The remaining portion of the note payable that is not due within that period of time is reported as a(n) (Current Liability OR Adjustment to Retained Earnings OR Long term liability)

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On January 1, the first day of the fiscal year, Shiller Company borrowed $86,000 by giving a seven-year, 8% installment note to Soros Bank. The

On January 1, the first day of the fiscal year, Shiller Company borrowed $86,000 by giving a seven-year, 8% installment note to Soros Bank. The note requires annual payments of $16,518, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $6,880 and principal repayment of $9,638.

Required:

Journalize the entries to record the following transactions. Refer to the Chart of Accounts for exact wording of account titles.

1.	Issued the installment note for cash on the first day of the fiscal year.
2.	Paid the first annual payment on the note.

Explain how the notes payable would be reported on the balance sheet at the end of the first year.

CHART OF ACCOUNTS

Shiller Company

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable
122	Allowance for Doubtful Accounts
126	Interest Receivable
127	Notes Receivable
131	Merchandise Inventory
141	Office Supplies
142	Store Supplies
151	Prepaid Insurance
191	Land
192	Store Equipment
193	Accumulated Depreciation-Store Equipment
194	Office Equipment
195	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
221	Salaries Payable
231	Sales Tax Payable
232	Interest Payable
241	Notes Payable
251	Bonds Payable
252	Discount on Bonds Payable
253	Premium on Bonds Payable

	EQUITY
311	Common Stock
312	Paid-In Capital in Excess of Par-Common Stock
315	Treasury Stock
321	Preferred Stock
322	Paid-In Capital in Excess of Par-Preferred Stock
331	Paid-In Capital from Sale of Treasury Stock
340	Retained Earnings
351	Cash Dividends
352	Stock Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue
611	Gain on Redemption of Bonds

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5

B. Explain how the notes payable would be reported on the balance sheet at the end of the first year.

Notes payable are reported as liabilities on the balance sheet. The portion of the note payable that is due within ______ (Three months OR Six Months OR One year) is reported as a _________ (Contra liability OR current liability OR long-term liability). The remaining portion of the note payable that is not due within that period of time is reported as a(n) _______________ (Current Liability OR Adjustment to Retained Earnings OR Long-term liability)