Entries for Installment Note Transactions four-year, 996 installment note from C

Question

Entries for Installment Note Transactions four-year, 996 installment note from Campbell Bank. The note requires annual payments of $3,704, begi On January 1, Year 1, Bryso December 31, Year 1. Company obtained a $12,000 xpense to the nearest w a. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4 Enter all amounts as positive numbers. . Round the computation of the interest e Amortization of Installment Notes Year Ending December 31 Interest Expense (9% of January 1 Note Carrying Amount) December 31 Carrying Amount Decrease in January 1 Carrying Amount Note Payment (Cash Paid) Notes Payable Year 1 Year 2 Year 3 Year 4 b. Journalize the entries for the issuance of the note and the four annual note payments. For a compound transaction, if an amount box does not require an entry, leave blank. Year 1 Jan. 1 Year 1 Dec. 31

Explanation / Answer

Answer a Year Ending Dec 31 Jan 1, Carrying Amount Note Payment (Cash Paid) Interest Expenses (9% of Jan 1 Note Carrying Amt) Decrease in Notes Payable Dec 31, Carrying Amount Year 1               12,000                       3,704                           1,080                   2,624                       9,376 Year 2                  9,376                       3,704                              844                   2,860                       6,516 Year 3                  6,516                       3,704                              586                   3,118                       3,398 Year 4                  3,398                       3,704                              306                   3,398                               0 Answer b. Journal Entry Date Particulars Dr. Amt. Cr. Amt. Year 1 1-Jan Cash                                                           Dr.      12,000    To Notes Payable      12,000 (Record the cash borrowed from Campbell Bank) 31-Dec Notes Payable                                      Dr.         2,624 Interest Expenses                               Dr.         1,080    To Cash 3704 (Record the installment paid) Year 2 Notes Payable                                      Dr.         2,860 31-Dec Interest Expenses                               Dr.            844    To Cash 3704 (Record the installment paid) Year 3 Notes Payable                                      Dr.         3,118 31-Dec Interest Expenses                               Dr.            586    To Cash 3704 (Record the installment paid) Year 4 Notes Payable                                      Dr.         3,398 31-Dec Interest Expenses                               Dr.            306    To Cash 3704 (Record the installment paid) Answer c. Interest Expenses of $1,080 would be reported on the income statement.

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