Question

On January 1, 20Y2, Hebron Company issued a $175,000, five-year, 8% installment note to Ventsam Bank. The note requires annual payments of $43,830, beginning on December 31, 20Y2.Journalize the entries to record the following:

Answer 1

Answer and Explanation:

The journal entries are shown below:

1. Cash Dr $175,000

To note payable $175,000

(being note payable is issued)

2. Interest expense Dr (8% of $175,000) $14,000

To interest payable $14,000

(being interest expense is recorded)

3. Interest payable $14,000

Note payable $29,830

To cash $43,830

(being cash paid is recorded)

4. Interest expense $6,253

To interest payable $6,253

(being interest expense is recorded)

5. Interest payable $6,253

Note payable $37,577

To cash $43,830

(being cash paid is recorded)