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Entries for installment note transactions On the first day of the fiscal year, Shiller Company borrowed $85,000 by giving a seven-year, 7% installment note to Soros Bank. The note requires annual payments of $15,772, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $5,950 and principal repayment of $9,822. a. Journalize the entries to record the following: 1. Issued the installment note for cash on the first day of the fiscal year. 2. Paid the first annual payment on the note. b. Explain how the notes payable would be reported on the balance sheet at the end of the first year.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 14, Problem 14.10EX
Textbook Problem

Entries for installment note transactions

On the first day of the fiscal year, Shiller Company borrowed $85,000 by giving a seven-year, 7% installment note to Soros Bank. The note requires annual payments of $15,772, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $5,950 and principal repayment of $9,822.

a. Journalize the entries to record the following:

1. Issued the installment note for cash on the first day of the fiscal year.

2. Paid the first annual payment on the note.

b. Explain how the notes payable would be reported on the balance sheet at the end of the first year.

Expert Solution

a (1)

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 of Solution

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

Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

  Cash &#...
Expert Solution

2.

To determine

To Journalize: First annual payment on the note.

Expert Solution

(b)

To determine

To Explain: How notes payable would be reported on the balance sheet at end of the first year.

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Chapter 14 Solutions

Accounting
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