Question

On January 1, 2019, Brooks, Inc., borrows $90,000 from a bank to purchase machinery. Brooks signs a 5 percent installment note requiring four annual payments of principal plus interest. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.
Date General Journal Debit CreditJan 01

Answer 1

Answer:

January 1, 2019, loan received from bank

Dr Cash 90,000

    Cr Notes payable 90,000

January 1, 2020, first installment paid

Dr Notes payable 22,500

Dr Interest expense 4,500

    Cr Cash 27,000

January 1, 2021, second installment paid

Dr Notes payable 22,500

Dr Interest expense 3,375

    Cr Cash 25,875

January 1, 2022, third installment paid

Dr Notes payable 22,500

Dr Interest expense 2,250

    Cr Cash 24,750

January 1, 2023, fourth installment paid

Dr Notes payable 22,500

Dr Interest expense 1,125

    Cr Cash 23,625