Question
On the first day of the fiscal year, a company issues $63,000, 12%, five-year installment notes that have annual payments of $17,477. The first note
On the first day of the fiscal year, a company issues $63,000, 12%, five-year installment notes that have annual payments of $17,477. The first note payment consists of $7,560 of interest and $9,917 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.
Accounts PayableBonds PayableCashInterest ExpenseInterest PayableNotes PayableCash | Cash | Cash | |
Accounts PayableBonds PayableCashInterest ExpenseInterest PayableNotes PayableNotes Payable | Notes Payable | Notes Payable |
Feedback
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.
Accounts PayableBonds PayableCashInterest ExpenseInterest PayableInterest ReceivableInterest Expense | Interest Expense | Interest Expense | |
Accounts PayableAccounts ReceivableBonds PayableCashInterest PayableNotes PayableNotes Payable | Notes Payable | Notes Payable | |
Accounts PayableBonds PayableCashInterest ExpenseInterest PayableNotes PayableCash | Cash | Cash |
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