Question

On January 1, 2021, Tropical Paradise borrows $36,000 by agreeing to a 5%, four-year note with...

On January 1, 2021, Tropical Paradise borrows $36,000 by agreeing to a 5%, four-year note with the bank. The funds will be used to purchase a new BMW convertible for use in promoting resort properties to potential customers. Loan payments of $829.05 are due at the end of each month with the first installment due on January 31, 2021. Required: Record the issuance of the installment note payable and the first two monthly payments. (Do not round intermediate calculations. Round your final answers to 2 decimal places. If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Journal Entries

1.Record the issuance of a note payable

2.Record the first monthly payment.

3.Record the second monthly payment.

Business   Accounting   
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Answer #1

--Journal entries required

Date Accounts title Debit Credit
01-Jan-21 Cash $36,000.00
   Notes Payable $36,000.00
(to record issuance of notes payable)
31-Jan-21 Interest Expense ($36000 x 5% x 1/12) $150.00
Notes Payable $679.05
   Cash $829.05
(to record #1 payment)
28-Feb-21 Interest Expense ([$36000-679.05] x 5% x 1/12) $147.17
Notes Payable $681.88
   Cash $829.05
(to record #2 payment)
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