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Entries for installment note transactions On January 1 of Year 1, Bryson Company obtained a $147,750, four-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31 of Year 1. A. Prepare a table for this installment note, similar to the one presented in Exhibit 4. Round to the nearest dollar. B. Journalize the entries for the issuance of the note and the four annual note payments. C. Describe how the annual note payment would be reported on the Year 1 income statement.
Corporate Financial Accounting
Solutions
Corporate Financial Accounting
Entries for installment note transactions
On January 1 of Year 1, Bryson Company obtained a $147,750, four-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31 of Year 1.
A. Prepare a table for this installment note, similar to the one presented in Exhibit 4. Round to the nearest dollar.
B. Journalize the entries for the issuance of the note and the four annual note payments.
C. Describe how the annual note payment would be reported on the Year 1 income statement.
A.
Installment note: It is a debt in which the borrower is required to pay equal periodic payments to the lender based on the term of the note.
Note Payable: Note payable is an obligation of the business to pay to its creditors, in future for the benefits received that carry some interest.
To prepare: A table for the installment note.
Explanation of Solution
Prepare a table for the installment note.
| For the Year Ending December 31 | January 1 Carrying Amount |
Note Payment (Cash Paid) | Interest Expense (7% of January 1 Note Carrying Amount) | Decrease in Notes Payable | December 31 Carrying Amount |
| A | B | C | D (B – C) |
E (A – D) | |
| Year 1 | $147,750 | $43... |
B.
To journalize: The entries to record issuance of note and the four annual note payments.
C.
To explain: How the annual note payment would be reported on the Year 1 income statement.
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