Entries for Installment Note Transactions On January 1 of 20Y2, Hebron Company i

Question

Entries for Installment Note Transactions

On January 1 of 20Y2, Hebron Company issued a $52,000, 4-year, 11% installment note to Ventsam Bank. The note requires annual payments of $16,761, beginning on December 31 of 20Y2.

Journalize the entries to record the following.

20Y2

Jan. 1 Issued the note for cash at its face amount.

Dec. 31 Paid the annual payment on the note, which consisted of interest of $5,720 and principal of $11,041.

20Y5

Dec. 31 Paid the annual payment on the note, which included interest of $1,661. The remainder of the payment reduced the principal balance on the note.

Issued the note for cash at its face amount.

Year 1 Jan. 1

Paid the annual payment on the note, which consisted of interest of $5,720 and principal of $11,041. If an amount box does not require an entry, leave it blank.

Year 1 Dec. 31

Paid the annual payment on the note, which included interest of $1,661. The remainder of the payment reduced the principal balance on the note. If an amount box does not require an entry, leave it blank.

Year 4 Dec. 31

Explanation / Answer

Year 1 January 1. To record issue of note for cash Date Account title Debit Credit Year1 January.1 Cash 52000 Note payable 52000 Year 1 December 31. To record payment of 1st instalment Date Account title Debit Credit Year1 December.31 Note payable 11041 Interest expense 5720 Cash 16761 Year 4 December 31. To record payment of final instalment Date Account title Debit Credit Year4 December.31 Note payable 15100 Interest expense 1661 Cash 16761

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