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)