On January 1, 2017, Eagle borrows $31,000 cash by signing a four-year, 8% instal

Question

On January 1, 2017, Eagle borrows $31,000 cash by signing a four-year, 8% installment note. The note requires four equal payments of $9,360, consisting of accrued interest and principal on December 31 of each year from 2017 through 2020.
Prepare the journal entries for Eagle to record the loan on January 1, 2017, and the four payments from December 31, 2017, through December 31, 2020.
  

No Date General Journal Debit Credit 1 Jan 01, 2017 Cash 31,000 31,000 2 Dec 31, 2017 Interest expense Notes payable Cash 9,360 3 Dec 31, 2018 Interest expense Notes payable Cash 4 Dec 31, 2019 Interest expense Notes payable Cash 5 Dec 31, 2020 Interest expense Notes payable Cash

Explanation / Answer

Jan-1-17 Cash 31000      Notes payable 31000 Dec-31-17 Interest expense 2480 =31000*8% Notes payable 6880       Cash 9360 Dec-31-18 Interest expense 1930 =(31000-6880)*8% Notes payable 7430       Cash 9360 Dec-31-17 Interest expense 1335 =(31000-6880-7430)*8% Notes payable 8025       Cash 9360 Dec-31-17 Interest expense 695 =(31000-6880-7430-8025)*8% Notes payable 8665       Cash 9360

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