Question

On January 1 of Year 1, Bryson Company obtained a $147,750, four-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31 of Year 1.

Answer 1

Installment note from Campbell Bank.

1-Jan Note intt expense Decrease 31-Dec

Amortization of Installment Notes Carrying payment 7% in  Carrying

Year ending December 31   amount cash paid   notes payable amount

               

year 1       147,750 43,620 10343 33,278 114,473

year 2       114,473 43,620 8013 35,607 78,866

year 3       78866 43,620 5521 38,099 40,766

year 4       40766 43,620 2854 40,766 0

               

               

               

b)   Journal Entries          

 Date Account titles & Explanations     Debit Credit

               

year 1 1-Jan Cash         147,750  

   Notes payable         147,750

   (to record issuance of note)        

               

year 1 31-Dec Interest expense       10343  

   Notes payable       33,278  

   cash           43,620

   (to record interest expense)        

               

year 2 31-Dec Interest expense       8013  

   Notes payable       35,607  

   cash           43,620

   (to record interest expense)        

               

year 3 31-Dec Interest expense       5521  

   Notes payable       38,099  

   cash           43,620

   (to record interest expense)        

               

year 4 31-Dec Interest expense       2854  

   Notes payable       40,766  

   cash           43,620

   (to record interest expense)        

               

c) interest expense of  10,343 would be reported on the income statement of Bryson Company.

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