On January 1, 2021, Corvallis Carnivals borrows $17,000 to purchase a delivery truck by agreeing to a 6%, five-year loan with the bank. Payments of $328.66 are due at the end of each month, with the first installment due on January 31, 2021.
Record the issuance of the note payable and the first monthly payment.

On January 1, 2021

Dr Cash $17,000

Cr 6% loan Payable $17,000

On January 31, 2021

Dr 6% loan Payable $17,000

Dr Interest Expense $1,020

Cr Cash Account                $18,020

Explanation:

On January 1, 2021

The increase in note payable is because of increase in the cash asset which means that the cash asset must be debit and the increase in note payable must be credited with the amount borrowed which is $17,000.

Dr Cash $17,000

Cr 6% loan Payable $17,000

On January 31, 2021

On this date the loan note payable of $17,000 is paid back to lender along with the interest of 6% which is $1,020 (6% * $17,000). This means the liability has been decrease which must be debited and the interest expense arised which is debit in nature and increase in expense is always debited. The cash is paid which is decrease in asset and the decrease in asset is always credited.

Dr 6% loan Payable $17,000

Dr Interest Expense $1,020

Cr Cash Account                $18,020

The journal entry to record the bank loan:

January 1, 2021, bank loan for purchasing delivery truck

Dr Cash 17,000

    Cr Note payable- Bank XYZ 17,000

January 31, 2021, first monthly payment.

Dr Interest expense 85

Dr Notes payable- Bank XYZ 243.66

    Cr Cash 328.66

Explanation:

The journal entry to record the bank loan:

Dr Cash 17,000

    Cr Note payable- Bank XYZ 17,000

To determine the amount of principal and interest paid, I'm going t use an excel spreadsheet for the amortization table:

the first monthly payment included $85 in interests and $243.66 principal. *The complete amortization schedule is attached.

So the journal entry to record the payment of the first installment is:

Dr Interest expense 85

Dr Notes payable- Bank XYZ 243.66

    Cr Cash 328.66

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longer, make them feel important and reduce costs for hiring new employees.

explanation:

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