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Chapter 12: Q1TI (page 623)

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.

Short Answer

Expert verified

The amount paid on the first payment of the note payable is $23,200.

Step by step solution

01

Definition of notes payable

The notes payable is a type of long-term liability in which a contract is signed between two parties.

02

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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Most popular questions from this chapter

Preparing the liabilities section of the balance sheet

Luxury Suites Hotels includes the following selected accounts in its general ledger at

December 31, 2018:

Notes Payable (long-term) \( 200,000 Accounts Payable \) 33,000

Bonds Payable (due 2022) 450,000 Discount on Bonds Payable 13,500

Interest Payable (due next year) 1,000 Salaries Payable 2,600

Estimated Warranty Payable 1,300 Sales Tax Payable 400

Prepare the liabilities section of Luxury Suites’s balance sheet at December 31, 2018.

What type of account is Discount on Bonds Payable? What is its average balance? Is it added to or subtracted from the Bonds Payable charge to determine the carrying amount?

Analyzing and journalizing bond transactions

On January 1, 2018, Electricians Credit Union (ECU) issued 8%, 20-year bondspayable with face value of $400,000. The bonds pay interest on June 30 andDecember 31. The issue price of the bonds is 104.

Journalize the following bond transactions:

a. Issuance of the bonds on January 1, 2018.

b. Payment of interest and amortization on June 30, 2018.

c. Payment of interest and amortization on December 31, 2018.

d. Retirement of the bond at maturity on December 31, 2037, assuming the last interestpayment has already been recorded.

Preparing an amortization schedule and recording mortgages payable

entries

Kellerman Company purchased a building and land with a fair market value of

\(550,000 (building, \)425,000, and land, \(125,000) on January 1, 2018. Kellerman

signed a 20-year, 6% mortgage payable. Kellerman will make monthly payments of

\)3,940.37. Round to two decimal places. Explanations are not required for journal

entries.

Requirements

1. Journalize the mortgage payable issuance on January 1, 2018.

2. Prepare an amortization schedule for the first two payments.

3. Journalize the first payment on January 31, 2018.

4. Journalize the second payment on February 28, 2018.

What type of account is Premium on Bonds Payable? What is its normal balance? Is it added to or subtracted from the Bonds Payable account to determine the carrying amount?
See all solutions

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