Question

On January 1, 2019, Moira, Inc. borrowed $100,000 on a 10-year 9% installment note payable to buy the Rosebud Motel. The terms of the note require 10 equal annual payments each December 31 for 10 years. The required journal entry to record the first payment on the note on December 31, 2019 would include a debit to Notes Payable in the amount of

Answer 1

Answer:

$15,582

Explanation:

On this question, use the Time Value of Money Techniques to find the the Annual Instalment (PMT).The amount of annual installment can be calculated using a Financial Calculator as :

PV = $100,000

N = 10

I = 9 %

FV = 0

P/YR = 1

PMT = ?

Entering the data as shown in a financial calculator gives an annual instalment (PMT) of $15,582.

The payment journal would be :

Note Payable $15,582 (debit)

Cash $15,582 (credit)

Thus, this would be a debit to Notes Payable in the amount of $15,582.