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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Journalizing installment notes

On the first day of the fiscal year, a company issues $45,000, 8%, six-year installment notes that have annual payments of $9,734. The first note payment consists of $3,600 of interest and $6,134 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

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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