1. Installment Notes On January 1, 2018, Julee Enterprises borrows $30,000 from
ID: 2568316 • Letter: 1
Question
1. Installment Notes On January 1, 2018, Julee Enterprises borrows $30,000 from a bank by agreeing to a 6%, 4-year note with the bank. Payments of $704.55 are due at the end of each month with the first installment due on January 31, 2018. Use this information to answer questions Q1-Q3.
Q1. Prepare journal entries for the following events:1) Record the issuance of the note payable. 2) Record the first two monthly payments.
Q2. What is the carrying value of the notes on January 31, 2018 and on February 28, 2018, respectively?
Q3. Is the carrying value of the note increasing or decreasing over time?
Explanation / Answer
working note:
amortization schedule will show the break up of interest paid and principal repaid:
the following will be the required journal entries:
Q2. Carrying value of note on January 31.= $29,445.45.....(from closing balance column of table above).
ON February, 28 = $28,88.13.....(from table above).
Q3. Since the value of closing balance of notes is less than opening balance, it can be said that the carrying value of note is decreasing overtime.
Opening balance Interst @6% Installment paid Principal repaid Closing balance January 1 nil nil nil nil $30,000 January31 $30,000 (30,000*6%*1/12)=>$150 $704.55 $704.55-150=>$554.55 $30,000-554.55=>$29,445.45 February 28 $29,445.45 (29,445.45*6%*1/12)=>$147.23 $704.55 $704.55-147.23=>$557.32 $29,445.43-557.55=>$28,888.13Related Questions
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