10 D Thu 955 PM Help Save Exit Submit On January 1 2017 MM

* 10% D Thu 9:55 PM Help Save& Exit Submit On January 1, 2017, MM Co. borrows $250 000 cash from a bank and in return signs an 4% instalment note for f ve annual payments of $56157 each, with the first payment due one year after the note is signed. tbl. (Use PV factors from table provided.) 1. Prepare the journal entry to record issuance of the note. Journal entry worksheet Record the issuance of the note. Note: Enter debits befare credies. Jan 01 4) 4

Solution

1.

Journal entry for issuance of Installment note @ 4%

         Cash A/c Dr.          250000 $

            To Installment Note A/c                      250000 $

         ( Loan borrowed and installment note issued )

2. Calculation of Interest and principal repaid payment on 31 th December -

Therefore Interest expense = 10000 $

And principal Reduction = 46156 $

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The ask of question was only journal entry for issuance therefore whole answer with respect to interest, repayment of Note are not made for coming years. For any doubt feel free to ask in comment section :)

Annual Ins. $	Interest @ 4%	Principal Repaid $	Outstanding Amount $
56156	250000 * 4 % = 10000 $	56156- 10000 = 46156 $	250000 - 46156 = 203844 $