Question & Answer: On January 1, the first day of the fiscal year, Shiller Company borrowed $145,000 by giving a seven-year, 5% installment n…..

On January 1, the first day of the fiscal year, Shiller Company borrowed $145,000 by giving a seven-year, 5% installment note to Soros Bank. The note requires annual payments of $25,059, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $7,250 and principal repayment of $17,809.
Required:
A.   Journalize the entries to record the following transactions.
1.   Issued the installment note for cash on the first day of the fiscal year.
2.   Paid the first annual payment on the note.

Expert Answer

 

JOURNAL ENTRIES :

DATE ACCOUNTS & EXPLANATION DEBIT CREDIT
Jan 1 Cash a/c 145000
     Notes Payable a/c 145000
(TO record borrow money by notes)
Dec 31 Interest expenses a/c 7250
Notes payable a/c 17809
       Cash a/c 25059
(To record first annual payment on the note)
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