Question

on january 1, year 1, stratton company borrowed $270,000 on a 10-year, 8% installment note payable. the terms of the note require stratton to pay 10 equal payments of $40,238 each december 31 for 10 years. the required general journal entry to record the payment on the note on december 31, year 2 is (round to the nearest dollar):

Answer 1

On December 31 of Year 2, the Stratton Company's installment note payable payment needs to be recorded. The installment note payable is for 10 years and has an 8% interest rate. The terms of the note necessitate the company to pay ten equal payments of $40,238 every year on December 31.The required general journal entry to record the payment on the note on December 31, Year 2, is as follows:ParticularsAmountDr.Installment Note Payable$40,238Cr.Cash$40,238Installment note payable is the account debited in this transaction as this payment has to be made against the payment of the loan amount. Cash is credited as the Stratton Company is making a payment in cash for the loan that it has taken.Reasoning:Stratton Company borrowed $270,000 on a 10-year, 8% installment note payable.The terms of the note necessitate Stratton to pay ten equal payments of $40,238 each December 31 for ten years.The required general journal entry to record the payment on the note on December 31, Year 2, is as follows:ParticularsAmountDr.Installment Note Payable$40,238Cr.Cash$40,238