46.6k views
0 votes
On January 1, Year 1, Stratton Company borrowed $100,000 on a 10-year, 7% installment note payable. The terms of the note require Stratton to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general journal entry to record the first payment on the note on December 31, Year 1 is:

User DzITC
by
8.2k points

1 Answer

1 vote

Answer:

Dr interest expense $7,000

Dr notes payable $7,238

Cr cash $14,238

Step-by-step explanation:

The first task is to compute interest expense on the loan in year 1 which is shown below:

interest expense=$100,000*7%

interest expense=$7,000

Principal repayment=repayment-interest repayment

Principal repayment=$14,238-$7,000=$7,238

The double entries are to debit interest expense and notes payable with $7,000 and $7,238 respectively while cash is credited with $14,238 as an outflow of cash.

User Alexander Larikov
by
8.6k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories