Question

On May 1, 2016, Butler Services issued a long-term note payable for $35,000. The note will be paid over five-years with annual principal payments of $7,000, plus interest, on May 1 of each year beginning on May 1, 2017. Prepare the journal entry for the issuance of the note.

Answer 1

Entry for notes issue
Date	General Journal	Debit	Credit
1-May-16	Cash	$ 35,000.00
	Notes payable		$ 35,000.00
	(Notes payable issued)

A five year notes payable is a long term notes payable. Interest on notes payable will be recorded at the year end and at the time of payment of installments. Adjusting entry for interest accrues will be made on December 31 2016 for interest for 8 months.