On January 1, 2015, Eagle borrows $24,000 cash by signing a four-year, 8% installment note

On January 1, 2015, Eagle borrows $24,000 cash by signing a four-year, 8% installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 2015 through 2018.

Prepare the journal entries for Eagle to record the loan on January 1, 2015, and the four payments from December 31, 2015, through December 31, 2018.

Explanation:

		Payments
	(A)	(B)	(C)	(D)	(E)
Period Ending Date	Beginning Balance	Debit Interest Expense	Debit Notes payable	Credit Cash	Ending Balance
2015	$ 24,000	$ 1,920	$ 5,326	$ 7,246	18,674
2016	18,674	1,494	5,752	7,246	12,922
2017	12,922	1,034	6,212	7,246	6,710
2018	6,710	536*	6,710	7,246
Total		$ 4,984	$ 24,000	$ 28,984

*Adjusted for rounding

 

Cash

=

$24,000 / 3.3121 = $7,246

Beginning Balance = Prior Ending Balance

Debit Interest Expense = 8% × Beginning Balance

Debit Notes Payable = Credit Cash – Debit Interest Expense

Credit Cash = computed

Ending Balance = Beginning Balance – Debit Notes Payable

On January 1, 2015, Eagle borrows $27,000 cash by signing a four-year, 9% installment note

On January 1, 2015, Eagle borrows $27,000 cash by signing a four-year, 9% installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 2015 through 2018.

1.	Compute the amount of each of the four equal total payments.

2.	Prepare an amortization table for this installment note. (Round your intermediate calculations to the nearest dollar amount.)

Explanation:

1.

Amount of each payment	=	Initial note balance / Table B.3 value
	=	$27,000 / 3.2397 = $8,334

2.

Beginning Balance = Prior Ending Balance

Debit Interest Expense = 9% × Beginning Balance

Debit Notes Payable = Credit Cash – Debit Interest Expense

Credit Cash = computed

Ending Balance = Beginning Balance – Debit Notes Payable

Sylvestor Systems borrows $108,000 cash on May 15, 2015, by signing a 150-day, 7% note

Sylvestor Systems borrows $108,000 cash on May 15, 2015, by signing a 150-day, 7% note.

1.	On what date does this note mature?
	October 12, 2015

2.	Assume the face value of the note equals $108,000, the principal of the loan.

(a)	Prepare the journal entry to record issuance of the note.

(b)	First, complete the table below to calculate the interest expense at maturity. Use those calculated values to prepare your journal entry to record payment of the note at maturity. (Use 360 days a year. Do not round intermediate calculations.)

Explanation:

1.

Maturity date = May 15 + 150 days = October 12, 2015.