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Steven Green started a company by issuing a $150,000 face value note to Mid-Atlantic Bank on...

Steven Green started a company by issuing a $150,000 face value note to Mid-Atlantic Bank on July 1, 2017. The note had an 8% annual interest rate and a five year term. Payments of $37,569 are to be made on June 30 for five years beginning on June 30, 2018.

a. What is the journal entry to record the receipt of the note?

b. What is the adjusting journal entry that is necessary at December 31, 2017?

c. Record the payment of the first payment on June 30, 2018.

d. What is the principal balance on June 30, 2018?

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Answer #1

Journal entry :

Date account & explanation debit credit
July1,2017 Cash 150000
     Notes payable 150000
(To record receipt of note)
Dec 31,2017 Interest expense (150000*8%*6/12) 6000
     Interest payable 6000
(To record adjusting entry)
June 30,2018 Interest payable 6000
Interest expense 6000
Notes payable 25569
     Cash 37569
(To record first payment)

d) Principal balance on june 30,2018 = 150000-25569 = 124431

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