Question

On January 1, 20Y2, Hebron Company issued a $175,000, five-year, 8% installment note to Ventsam Bank. The note requires annual payments of $43,830, beginning on December 31, 20Y2. Journalize the entries to record the following:
20Y2 Jan. 1. Issued the note for cash at its face amount.
Dec. 31. Paid the annual payment on the note, which consisted of interest of $14,000 and principal of $29,830.
20Y5 Dec. 31. Paid the annual payment on the note, included $6,253 of interest. The remainder of the payment reduced the principal balance on the note.

Answer 1

Answer:

Hebron Company

Journal Entries:

Jan. 1, 20Y2:

Debit Cash $175,000

Credit 8% Note Payable (Ventsam Bank) $175,000

To record the issuance of the note.

Dec. 31, 20Y2:

Debit 8% Note Payable (Ventsam Bank) $29,830

Debit Interest Expense $14,000

Credit Cash $43,830

To record the first payment of the note with interest.

Dec. 31, 20Y5:

Debit 8% Note Payable (Ventsam Bank) $29,830

Debit Interest Expense $6,253

Credit Cash $36,083

To record the fourth payment of the note with interest.

Explanation:

a) Data and Analysis:

Jan. 1, 20Y2: Cash $175,000 8% Note Payable (Ventsam Bank) $175,000

Dec. 31, 20Y2: 8% Note Payable (Ventsam Bank) $29,830 Interest Expense $14,000 Cash $43,830

Dec. 31, 20Y5: 8% Note Payable (Ventsam Bank) $29,830 Interest Expense $6,253 Cash $36,083