On January 1, Year 1, Luzak Company issued a $45,000, 4-year, 8% installment note to McGee Bank. The note requires annual payments of $13,586, beginning on December 31, Year 1. Journalize the entries to record the following: Year 1 Jan. 1 Issued the note for cash at its face amount. Dec. 31 Paid the annual payment on the note, which consisted of interest of $3,600 and principal of $9,986. Year 4 Dec. 31 Paid the annual payment on the note, including $1,006 of interest. The remainder of the payment reduced the principal balance on the note.
Entries for Installment Note Transactions
On January 1, Year 1, Luzak Company issued a $45,000, 4-year, 8% installment note to McGee Bank. The note requires annual payments of $13,586, beginning on December 31, Year 1.
| Year 1 | |
| Jan. 1 | Issued the note for cash at its face amount. |
| Dec. 31 | Paid the annual payment on the note, which consisted of interest of $3,600 and principal of $9,986. |
| Year 4 | |
| Dec. 31 | Paid the annual payment on the note, including $1,006 of interest. The remainder of the payment reduced the principal balance on the note. |
Issued the note for cash at its face amount.
| Year 1, Jan. 1 | |||
Paid the annual payment on the note, which consisted of interest of $3,600 and principal of $9,986. For a compound transaction, if an amount box does not require an entry, leave it blank.
| Year 1, Dec. 31 | |||
Paid the annual payment on the note, including $1,006 of interest. The remainder of the payment reduced the principal balance on the note. For a compound transaction, if an amount box does not require an entry, leave it blank.
| Year 4, Dec. 31 | |||
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