Question

Dandy Candy bought a delivery vehicle for $45,000 by issuing an 8% installment note on January 1, 2021. Dandy will make 12 monthly payments of $3,914.50 at the end of each month.

Cash Reduction of Note
Period Payment Interest Exp Note Payable Payable
(Credit) (Debit) (Debit) Balance
At issue --- --- --- $45,000.00
01/31/21 $3,914.50 $300.00 $3,614.50 41,385.50
02/28/21 3,914.50 ? ? ?
03/31/21 3,914.50 ? ? ?
04/30/21 3,914.50 ? ? ?
05/31/21 3,914.50 ? 3,711.85 26,684.93
Required:
Using the partially completed amortization table above, prepare the journal entries for the end of March and the end of April.

Answer 1

Dandy Candy

Journal Entries for the end of March and April:

03/31/21 Debit Note Payable $3,662.85

Debit Interest Expense $251.65

Credit Cash $3,914.50

To record payment of interest and note payable on March 31, 2021.

04/30/21 Debit Note Payable $3,687.27

Debit Interest Expense $227.23

Credit Cash $3,914.50

To record payment of interest and note payable on April 30, 2021.

Step-by-step explanation:

a) Data and Calculations:

Cost of delivery vehicle = $45,000

Note Payable = $45,000

Interest rate on note = 8%

Date of issue of note = January 1, 2021

Monthly payments required = $3,914.50 for 12 months

Amortization Table

Cash Reduction of Note

Period Payment Interest Exp Note Payable Payable

(Credit) (Debit) (Debit) Balance

At issue --- --- --- $45,000.00

01/31/21 $3,914.50 $300.00 $3,614.50 41,385.50

02/28/21 3,914.50 ? ? ?

03/31/21 3,914.50 ? ? ?

04/30/21 3,914.50 ? ? ?

05/31/21 3,914.50 ? 3,711.85 26,684.93

Amortization Table

Cash Reduction of Note

Period Payment Interest Exp Note Payable Payable

(Credit) (Debit) (Debit) Balance

At issue --- --- --- $45,000.00

01/31/21 $3,914.50 $300.00 $3,614.50 41,385.50

02/28/21 3,914.50 275.90 3,638.50 37,746.90

03/31/21 3,914.50 251.65 3,662.85 34,084.05

04/30/21 3,914.50 227.23 3,687.27 30,396.78

05/31/21 3,914.50 202.65 3,711.85 26,684.93