Question

On the first day of the fiscal year, a company issues $65,000, 6%, five-year installment notes that have annual payments of $15,431. The first note payment consists of $3,900 of interest and $11,531 of principal repayment. Journalize the following transactions. Be sure to include the year in the date for both entries. Refer to the Chart of Accounts for exact wording of account titles.
2016
Jan. 1 Installment notes are issued
2017
Jan. 1 First annual note payment is made

Answer 1

Answer: Please see explanation column for answer.

Explanation:

a) Journal to record issuance of Installment notes

Date            Account                 Debit                  Credit

Jan. 1, 2016    Cash                  $65,000

              Notes payable                                      $65,000

b) Journal to record First annual note payment

Date            Account                      Debit                  Credit

Jan. 1, 2017 Interest expense      $3,900

              Notes   payable             $11, 531

                  Cash                                                        $15,431