Question

Journalizing Installment Notes On the first day of the fiscal year, a company issues $58,000, 10%, six-year installment notes that have annual payments of $13,317. The first note payment consists of $5,800 of interest and $7,517 of principal repayment a. Journalize the entry to record the issuance of the installment notes. Cash 58,000 Notes Payable v 58,000 Feedback Check My Work The cash payment is the same in each year. The interest and principal repayment, however, change each year. This is because the carrying amount (book value) of the note decreases each year as principal is repaid, which decreases the interest After the final payment, the carrying amount on the note is zero, indicating that the note has been paid in full b. Journalize the first annual note payment. For a compound transaction, if an amount box does not require an entry, leave it blank. Interest Receivable 5,800 13,317 Notes Payable 7,517 Interest Expense 13,317

Answer 1

1
a
Cash	58000
Notes payable		58000
b
Interest expense	5800
Notes payable	7517
Cash		13317

2

	Plan 1	Plan 2
Income before interest and tax	276000	276000
Less: Interest expense	92000	46000
Income before income tax	184000	230000
Less: Income tax 40%	73600	92000
Net income	110400	138000
Less: Preferred Dividends	0	76000
Net income for Common Stockholders	110400	62000
Divide By Common Shares outstanding	184000	124000
Earnings per shares on Common Stock	0.60	0.50