On January 1, Year 1, Luzak Company issued a $120,000, five-year, 6% installment note to McGee Bank.
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Question:
On January 1, Year 1, Luzak Company issued a $120,000, five-year, 6% installment note to McGee Bank. The note requires annual payments of $28,488, beginning on December 31, Year 1. Journalize the entries to record the following: Year 1 Jan. 1. Issued the note for cash at its face amount. Dec. 31. Paid the annual payment on the note, which consisted of interest of $7,200 and principal of $21,288. Year 4 Dec. 31. Paid the annual payment on the note, including $3,134 of interest. The remainder of the payment reduced the principal balance on the note.
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