On the first day of the fiscal year, a company issues $80,000, 7%, seven-year installment notes

On the first day of the fiscal year, a company issues $80,000, 7%, seven-year installment notes that have annual payments of $14,844. The first note payment consists of $5,600 of interest and $9,244 of principal repayment.

a. Journalize the entry to record the issuance of the installment notes.

b. Journalize the first annual note payment.


Answer:

a.
 Cash 80,000
Notes Payable 80,000
Issued installment notes for cash.
b.
 Interest Expense 5,600
Notes Payable 9,244
Cash 14,844
Paid principal and interest on installment notes.