A corporation borrowed $131,000 cash by signing a 5-year, 10% installment note r

Question

A corporation borrowed $131,000 cash by signing a 5-year, 10% installment note requiring equal annual payments each December 31 of $34,557. What journal entry would the issuer record for the first payment?

Debit Notes Payable $34,557; credit Cash $34,557.

Debit Interest Expense $8,357; debit Notes Payable $26,200;

credit Cash $34,557. Debit Notes Payable $34,557;

debit Interest Payable $13,100; credit Cash $47,657. Debit Notes Payable $13,100; credit Cash $13,100. Debit Interest Expense $13,100; debit Notes Payable $21,457; credit Cash $34,557.

Explanation / Answer

For the first payment, the issuer will record the following journal entry:

Debit Interest expense $13,100; Debit Notes payable $21,457; Credit Cash $34,557

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