Question

On the first day of the fiscal year, a company issues $65,000, 6%, five-year installment notes that have annual payments of $15,431. The first note payment consists of $3,900 of interest and $11,531 of principal repayment. Journalize the following transactions. Be sure to include the year in the date for both entries. Refer to the Chart of Accounts for exact wording of account titles.

2016
Jan. 1 Installment notes are issued
2017
Jan. 1 First annual note payment is made

Answer 1

Answer: Please see explanation column for answer.

Step-by-step explanation:

a) Journal to record issuance of Installment notes

Date Account Debit Credit

Jan. 1, 2016 Cash $65,000

Notes payable $65,000

b) Journal to record First annual note payment

Date Account Debit Credit

Jan. 1, 2017 Interest expense $3,900

Notes payable $11, 531

Cash $15,431