Final answer:
On January 1, 2024, Jasper Company debits Cash for $100,000 and credits Notes Payable for $100,000 to record the issuance of a three-year, $100,000 installment note with a 6% interest rate to Fargo Bank.
Step-by-step explanation:
On January 1, 2024, when Jasper Company issues the $100,000 installment note to Fargo Bank with a 6% annual interest rate, due over three years with annual payments of $39,847, the journal entry is straightforward. The company would debit Cash and credit Notes Payable to record the receipt of cash and the obligation incurred.
Here's how the entry would look on the date of issuance:
- Debit Cash: $100,000
- Credit Notes Payable: $100,000
No interest is recorded at the time of issuance since the payment including interest will start the following year. The entry simply reflects the initial cash inflow and the creation of a long-term liability for Jasper Company.
The issuance of the note by Jasper Company increases its liabilities (Notes Payable) by $100,000. At the same time, the company receives cash, which is recorded as an increase in the Cash account.