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Question

 Entries for Installment Note Transactions

On January 1, Year 1, Bryson Company obtained a $71,000,

four-year, 11% installment note from Campbell Bank. The note requires annual payments of $22,885, beginning on December 31, Year 1.

a. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4.

Note: Round the computation of the interest expense to the nearest whole dollar. Enter all amounts as positive numbers. In Year 4, round the amount in the Decrease in Notes Payable column either up or down to ensure that the Carrying Amount zeroes out.

Amortization of Installment NotesYear Ending

December 31

January 1

Carrying Amount

Note Payment

(Cash Paid)Interest Expense

(11% of January 1

Note Carrying

Amount)

Decrease in

Notes Payable

December 31

Carrying AmountYear 1$  $  $    $  $  Year 2            Year 3            Year 4          0      $  $    $        

b. Journalize the entries for the issuance of the note and the four annual note payments.

Note: For a compound transaction, if an amount box does not require an entry, leave it blank. For the Year 4 entry (due to rounding), adjust Notes Payable up or down to ensure that debits equal credits.

Year 1 Jan. 1 


 


Year 1 Dec. 31 


 


 


Year 2 Dec. 31 


 


 


Year 3 Dec. 31 


 


 


Year 4 Dec. 31 


 


 


c. How will the annual note payment be reported in the Year 1 income statement?

 


 of $ would be reported on the income statement.

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