Question

g On July 1, Shady Creek Resort borrowed $320,000 cash by signing a 10-year, 11.5% installment note requiring equal payments each June 30 of $55,480. What amount of interest expense will be included in the first annual payment

Answer 1

Interest portion for one year = $320,000 * 11.5% = $36,800

Total installment paid = $55,480

So, principal portion repaid = $55,480 - $36,800 = $18,680

Journal entry

Date General journal Debit Credit

Interest expense $36,800

Notes payable $18,680

To Cash $55,480