Homework SourseOn January 1 2017 MM Co borrows 280000 cash from a bank and
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-
Solution
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
