Question 14.8: Journalizing Installment Notes On the first day of the fisc...
Journalizing Installment Notes
On the first day of the fiscal year, a company issues a $30,000, 10%, five-year installment note that has annual payments of $7,914. The first note payment consists of $3,000 of interest and $4,914 of principal repayment.
a. Journalize the entry to record the issuance of the installment note.
b. Journalize the first annual note payment.
a. Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
b. Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,914
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,914