Question

On January 1, 2015, Johnson Company purchased a delivery truck for $72,000, paying $7,200 cash and financing the rest with a 4 year, 5% note, with monthly payments of $1,411.
Required:

a. Complete the loan amortization schedule below for the payments made on February 1 and March 1.
b. Prepare the journal entry for the purchase on January 1.
c. Prepare the journal entry for the 2nd loan payment on March 1

Answer 1

Answer and Explanation:

The computation is shown below:

a. Amortization schedule

Date       Payment          Interest          Principal      Loan Balance

Jan 1                                                                          $64,800

                                                                                ($72,000 - $7,200)

Feb 1           $1,411            $270             $1,141            $63,659

                          ($64,800 × 5% ÷ 12)

Mar 1           $1,411           $265             $1,146            $62,513

                             ($63,659 × 5% ÷ 12)

b. The journal entry is

Truck - equipment Dr $72,000

        To cash  $7,200

         To Note payable $64,800

(Being the purchase is recorded)

c. The journal entry is

Note payable $1,146

Interest expense $265

        To Cash $1,141

(Being loan payment is recorded)