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Journalizing installment notes 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. a. Journalize the entry to record the issuance of the installment notes. b. Journalize the first annual note payment.

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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

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Chapter
Section
BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
Chapter 12, Problem 12.8APE
Textbook Problem
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Journalizing installment notes

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.

  • a. Journalize the entry to record the issuance of the installment notes.
  • b. Journalize the first annual note payment.

a)

To determine

Long-term notes payable: Long-term notes payable represent a legal and written promise made by the business to pay a debt with interest over a period of more than a year. It is reported under the long-term liability section of the balance sheet.

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.

To Journalize: The issuance of the installment note.

Explanation:

Explanation of Solution

Prepare journal entry to record the issuance of the installment note.

...
Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

  Cash  

b)

To determine

To Journalize: First annual note payment.

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Chapter 12 Solutions

Financial & Managerial Accounting
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