Entries for installment note transactionsOn January 1, Year 1, Luzak Company issued a $120,000, five-year, 6% installment note to McGee Bank. The note requires annual payments of $28,488, beginning on December 31, Year 1. Journalize the entries to record the following:Year1 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 $7,200 and principal of $21,288.Year4 dec 31.Paid the annual payment on the note, including $3,134 of interest. The remainder of the payment reduced the principal balance on the note.

The journal entries are prepared to keep the record of day to day transactions of the business.

Answered: Entries for installment note…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Entries for installment note transactions
On January 1, Year 1, Luzak Company issued a $120,000, five-year, 6% installment note to McGee Bank. The note requires annual payments of $28,488, beginning on December 31, Year 1. Journalize the entries to record the following:

Year1
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 $7,200 and principal of $21,288.
Year4
dec 31.	Paid the annual payment on the note, including $3,134 of interest. The remainder of the payment reduced the principal balance on the note.

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