Question

On January 1, 2019, Eagle Company borrows $22,000 cash by signing a four-year, 6% installment note. The note requires four equal payments of $6,349, consisting of accrued interest and principal on December 31 of each year from 2019 through 2022. Prepare the journal entries for Eagle to record the note's issuance and the four payments. (Round your intermediate calculations and final answers to the nearest dollar amount.)

Answer 1

The journal entries for Eagle Company to record the issuance of the note and the four payments are provided.

Step-by-step explanation:

The journal entries for Eagle Company to record the note's issuance and the four payments are as follows:

1. Issuance of Note:
   Debit: Cash $22,000
   Credit: Notes Payable $22,000
2. First Payment on December 31, 2019:
   Debit: Interest Expense $1,320
   Debit: Notes Payable $5,029
   Credit: Cash $6,349
3. Second Payment on December 31, 2020:
   Debit: Interest Expense $2,196
   Debit: Notes Payable $4,153
   Credit: Cash $6,349
4. Third Payment on December 31, 2021:
   Debit: Interest Expense $1,576
   Debit: Notes Payable $4,773
   Credit: Cash $6,349
5. Final Payment on December 31, 2022:
   Debit: Interest Expense $792
   Debit: Notes Payable $5,557
   Credit: Cash $6,349

Answer 2

January 1, 2019

Cash $22,000 (debit)

Note Payable $22,000 (credit)

December 31, 2019

Interest Expense $1,320 (debit)

Note Payable $5,029 (credit)

Cash $6,349 (credit)

December 31, 2020

Interest Expense $1,018 (debit)

Note Payable $5,331 (credit)

Cash $6,349 (credit)

December 31, 2021

Interest Expense $698 (debit)

Note Payable $5,651 (credit)

Cash $6,349 (credit)

December 31, 2022

Interest Expense $359 (debit)

Note Payable $5,990 (credit)

Cash $6,349 (credit)

Step-by-step explanation:

First Prepare an amortization table to determine the accrued interest and principal for each of the 4 payments made for the duration of the note payable.

Enter the following Data to prepare the amortization schedule:

PV = $22,000

n = 4

r = 6%

Pmt = - $6,349

P/yr = 1

Fv = 0

When the Note is issued on January 1, 2019, the following entries are recorded :

Cash $22,000 (debit)

Note Payable $22,000 (credit)

The following are the Payments made at the end of the year :

December 31, 2019

Interest Expense $1,320 (debit)

Note Payable $5,029 (credit)

Cash $6,349 (credit)

December 31, 2020

Interest Expense $1,018 (debit)

Note Payable $5,331 (credit)

Cash $6,349 (credit)

December 31, 2021

Interest Expense $698 (debit)

Note Payable $5,651 (credit)

Cash $6,349 (credit)

December 31, 2022

Interest Expense $359 (debit)

Note Payable $5,990 (credit)

Cash $6,349 (credit)