Question

Exercise 10-11 Installment note entries LO C1 On January 1, 2018, Eagle borrows $20,000 cash by...

Exercise 10-11 Installment note entries LO C1 On January 1, 2018, Eagle borrows $20,000 cash by signing a four-year, 7% installment note. The note requires four equal payments of $5,905, consisting of accrued interest and principal on December 31 of each year from 2018 through 2021. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations and final answers to the nearest dollar amount. Round all table values to 4 decimal places, and use the rounded table values in calculations.) Prepare the journal entries for Eagle to record the loan on January 1, 2018, and the four payments from December 31, 2018, through December 31, 2021.

  • 1

    Eagle borrows $20,000 cash by signing a four-year, 7% installment note. Record the issuance of the note on January 1, 2018.

  • 2

    Record the payment of the first installment payment of interest and principal on December 31, 2018.

  • 3

    Record the payment of the second installment payment of interest and principal on December 31, 2019.

  • 4

    Record the payment of the third installment payment of interest and principal on December 31, 2020.

  • 5

    Record the payment of the fourth installment payment of interest and principal on December 31, 2021.

Homework Answers

Answer #1

General Journal   

No Date Account Title and Explanation Debit Credit
1 Jan.01.2018 Cash $20,000
Note Payable $20,000
2 Dec.31.2018 Interest Expense $1,400
NotePayable $4,505
Cash $5,905
3 Dec.31.2019 Interest Expense $1,085
Note Payable $4,820
Cash $5,905
4 Dec.31.2021 Interest Expense $747
NotePayable $5,158
Cash $5,905
5 Dec.31.2022 Interest Expense $388
Note Payable $5,517
Cash $5,905

Explanation;

Payments

Period A B C D E
Ending Date Beginning Balance Debit Interest Expense Debit Note Payable Credit Cash Ending Balance
2018 $20,000 $1,400 $4,505 $5,905 $15,495
2019 $15,495 $1,085 $4,820 $5,905 $10,675
2020 $10,675 $747 $5,158 $5,905 $5,517
2021 $5,517 $388* $5,517 $5905
Total $3,620 $20,000 $23,620

* Adjusted For Rounding

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