Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 7

Entries for installment note transactions
On the first day of the fiscal year, Shiller Company borrowed $85,000 by giving a seven-year, 7% installment note to Soros Bank. The note requires annual payments of $15,772, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $5,950 and principal repayment of $9,822.
a. Journalize the entries to record the following:
1. Issued the installment note for cash on the first day of the fiscal year.
2. Paid the first annual payment on the note.
b. Explain how the notes payable would be reported on the balance sheet at the end of the first year.