Question

Entries for Installment Note Transactions On January 1, Year 1, Bryson Company obtained a $36,000, four-year, 8 %% installment note from Campbell Bank. The note requires annual payments of $10,869, beginning on December 31, Year 1 amortization table for this installment note, similar to the one presented in Exhibit 4 a. Prepare a Note: Round the computation of the interest expense to the nearest whole dollar. Enter all amounts as positive numbers. In Year 4, round the amount n the Decrease in Notes Payable column either up or down to ensure that the Carrying Amount zeroes out Amortization of Installment Notes Interest Expense Year Ending (8% of January 1 December 31 January Note Payment Decrease in December Note Carrying Carrying (Cash Paid) Payable Carrying Amount No Amount) Amount Year 1 Year 2 Year 3 Year 4 ΕΧΗΙΒΙT 4 Amortization of Installment Notes A C D E Decrease in Notes Payable (B C) January 1 Carrying Amount Interest Expense (6% of January 1 Note Carrying Amount) December 31 Year Ending Note Payment (Cash Paid) Carrying Amount (A - D) December 31 S 5,698 (6% of $24,000) (6% of $19,742) (6% of $15,229) (6% of $10,445) (6% of $5,374) $ 4,258 20Υ4 $24,000 19,742 15,229 10,445 5,374 $1,440 1,185 $19,742 15,229 10,445 5,374 20Υ5 5,698 5,698 5,698 5,698 $28,490 4,513 4,784 5,071 20Υ6 914 2ΟΥ7 627 20Υ8 324 5,374 $24,000 $4,490 Rounded ($5,374-$5,698). b. Journalize the entries for the issuance of the note and the four annual note payments. rdown to ensure that debits equal credits. Note: For a compound transaction, if an amount box does not require an entry, leave blank. For the Year 4 entry (due to rounding), adjust Notes Payable up Year 1 Jan. 1 Year 1 Dec. 31 Year 2 Dec. 31 Year 3 Dec. 31 Year 4 Dec. 31 c. How will the annual note payment be reported i the Year 1 income statement? would be reported on the income statement.

Answer 1

Bryson Company Amortization of Installment Notes Calculation Jan 1 Carrying Amount Note Payment Interest expense Decrease in Notes Payable Dec 31 Carrying Amount Interest expense Dec 31 Carrying Amount Year -36,000 8% Year 1 -36,000-7,989 36,000 10,869 2,880 7,989 28,011 Year 2 -28,011*8% 28,011 10,869 2,241 8,628 19,383 -28,011-8,628 -19,383*8% Year 3 19,383 10,869 1,551 9,318 10,065 -19,383-9,318 Year 4 10,065 10,869 804 10,065 Notes Payable Note Payment less Int exp Jan 1 Carrying Amount less Decrease

Bryson Company Account Titles and Explanation Debit Credit Date Cash Year 1, Jan 1 36,000 Notes Payable 36,000 Year 1, Dec 31 Interest expense 2,880 Notes Payable 7,989 Cash 10,869 Year 2, Dec 31 Interest expense 2,241 Notes Payable 8,628 Cash 10,869 Year 3, Dec 31 Interest expense 1,551 Notes Payable 9,318 Cash 10,869 Year 4, Dec 31 Interest expense 804 Notes Payable 10,065 Cash 10,869 Req 3 Interest expense of $2,880 would be reported in Year 1, Income Statement