Question

STION I purchased GLOL Sur lo sed two new trucks for $112.000 on December 31. 2015. Shea paid $12,000 down and signed a 10% note for the balance. The note is to be paid off in five annual payments beginning 2016. The installments are to consist of equal amounts of principal plus accrued interest mortization table using the format below. 31, 2011 ure an amorti Principal Payment Each Period End-of- Period Principal Balance Beginning Interest of-Period Expense Principal for the Year Balance Period 2016 2017 2018 2019 2020 Prepare the journal entries required for 2016. Prepare the journal entries required for 2017

Answer 1

Solution:

Year	Beginning of period Principal Balance	Interest expense for the period	Principal payment each period	End of period - Principal Balance
2016	$100,000.00	$10,000.00	$20,000.00	$80,000.00
2017	$80,000.00	$8,000.00	$20,000.00	$60,000.00
2018	$60,000.00	$6,000.00	$20,000.00	$40,000.00
2019	$40,000.00	$4,000.00	$20,000.00	$20,000.00
2020	$20,000.00	$2,000.00	$20,000.00	$0.00

Journal Entries
Event	Particulars	Debit	Credit
31-Dec-16	Interest expense Dr	$10,000.00
	Notes payable Dr	$20,000.00
	To Cash		$30,000.00
	(To record interest and principal payment of note)

Journal Entries
Event	Particulars	Debit	Credit
31-Dec-17	Interest expense Dr	$8,000.00
	Notes payable Dr	$20,000.00
	To Cash		$28,000.00
	(To record interest and principal payment of note)