Question

Jones Company signed a 5-year note payable on January 1, 2019, of $100,000. The note requires annual principal payments each December 31 of $20,000 plus interest of 5%. The entry to record the annual payment on December 31, 2020, includes:

Answer 1

The entry to record the annual payment on December 31, 2020, by Jones Company is as follows:

Debit Note Payable $15,000

Debit Interest Expense $5,000

Credit Cash $20,000

How do you record annual payments?

Annual payments can be recorded by debiting the accounts that receive the value and crediting the account that gives value as above.

Data Analysis:

Note Payable = $100,000

Maturity period = 5 years

Date of Issuance = January 1, 2019

Principal repayment plus interest = December 31

Interest rate = 5%

Annual Interest in dollars = $5,000 ($100,000 x 5%)

Note Payable $15,000 Interest Expense $5,000 Cash $20,000

Thus, the entry to record the annual payment on December 31, 2020, by Jones Company is debits to Note Payable ($15,000) and Interest expense ($5,000), and a credit to Cash account ($20,000).

Learn more about recording annual payments at brainly.com/question/14290379