On January 1, Yeargan Company obtained a $125,000, 7-year 5% installment note from Farmers Bank. The note requires annual payments of $21,602, with the first payment occurring on the last day of the fiscal year. The first payment consists of $6,250 interest and principal repayment of $15,352.

Required:

Journalize the following entries:

If an amount box does not require an entry, leave it blank or enter "0".

a. Issued the installment note for cash on January 1.

b. Paid the first annual payment on the note.

a.
b.