1. Record the issuance of an installment note payable under each option. 2. Record the payments for the first and second month under each option. 3. Determine the total amount of interest paid under each option over the full period of the note.
1. Record the issuance of an installment note payable under each option. 2. Record the payments for the first and second month under each option. 3. Determine the total amount of interest paid under each option over the full period of the note.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Accounting
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Transcribed Image Text:Exercise 9-5 (Algo) Compute total interest and record installment notes (LO9-2)
A company decides to obtain a small-business loan of $227,000. The financial institution from which the company borrows offers two
options:
a. Borrow $227,000 at 6% with monthly payments of $4,388.55 over 5 years.
b. Borrow $227,000 at 7% with monthly payments of $2,635.66 over 10 years.
Required:
1. Record the issuance of an installment note payable under each option.
2. Record the payments for the first and second month under each option.
3. Determine the total amount of interest paid under each option over the full period of the note.
Answer is not complete.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Record the issuance of an installment note payable under each option. (If no entry is required for a particular
transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to 2 decimal places.)
General Journal
Credit
No
1
2
Transaction
1a
Required 3
1b
Interest Expense
Notes Payable
Interest Expense
Notes Payable
Required 1
X
Required 2 >
Debit
1,135.00 X
3,254 X
1,328.41 X
1,307 X
4,389
2,636 X
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