Q1TI
Question
On January 1, 2018, Fox Corporation signed an \(80,000, four-year, 4% note. The loan required Fox to make payments annually
on December 31 of \)20,000 principal plus interest.
1. Journalize the issuance of the note on January 1, 2018.
2. Journalize the first payment on December 31, 2018.
Step-by-Step Solution
Verified Answer
The amount paid on the first payment of the note payable is $23,200.
1Step 1: Definition of notes payable
The notes payable is a type of long-term liability in which a contract is signed between two parties.
2Step 2: Journal entries of notes payable
Date | Particulars | Debit | Credit |
January 1, 2018 | Cash | $80,000 |
|
| Notes Payable |
| $80,000 |
| (Receive cash from notes at 5%) |
|
|
|
|
|
|
December 31, 2018 | Notes Payable | $20,000 |
|
| Interest Expense ($80,000 * 4%) | $3,200 |
|
| Cash |
| $23,200 |
| (Being first payment of principal plus interest is made) |
|
|
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