Answer:
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
Answer:
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
