Question

On the first day of the fiscal year, Hawthorne Company obtained an $88,000, seven-year, 5% installment note from Sea Side Bank. The note requires annual payments of $15,208, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $4,400 and principal repayment of $10,808. The journal entry Hawthorne would record to make the first annual payment due on the note would include a:

Answer 1

Answer:

DR  - Interest expense - $4,400

Explanation:

DR  - Interest expense - $4,400

DR  - Notes payable     - $10,808

CR  - Bank/Cash           - $15,208

Answer 2

Answer:

Notes Payable will be debited by $10,808

Interest expense will be debited by $4,400

Cash will be credited by $15,208