On January 1, 2017 , MM Co. borrows $280,000 cash from a bank and in return sign

Question

On January 1, 2017 , MM Co. borrows $280,000 cash from a bank and in return signs an 8% installment note for five annual payments of $70,128 each, with the first payment due one year after the note is signed. (Use PV factors from table) A. Prepare a journal entry to record the issuance of the note B. For the first $70,128 annual payment of December 31, 2016, what amount goes towards interest expense? What amount goes towards principle reduction if the note Interest expense- Principle reduction- On January 1, 2017 , MM Co. borrows $280,000 cash from a bank and in return signs an 8% installment note for five annual payments of $70,128 each, with the first payment due one year after the note is signed. (Use PV factors from table) A. Prepare a journal entry to record the issuance of the note B. For the first $70,128 annual payment of December 31, 2016, what amount goes towards interest expense? What amount goes towards principle reduction if the note Interest expense- Principle reduction- A. Prepare a journal entry to record the issuance of the note B. For the first $70,128 annual payment of December 31, 2016, what amount goes towards interest expense? What amount goes towards principle reduction if the note Interest expense- Principle reduction-

Explanation / Answer

A. Journal Entry Date Account Tittle & Explanation debit credit Jan-01 Cash 280000      Notes payable 280000 (To record Issue of note) b. Computation of Interesr expense and principal reduction Interest expense(280000*8%)= $22400 Principal reduction(70128-22400)= $47728

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