Question

n January 1, 2018, Corvallis Carnivals borrows $26,000 to purchase a delivery truck by agreeing to a 6%, four-year loan with the bank. Payments of $610.61 are due at the end of each month, with the first installment due on January 31, 2018. Record the issuance of the note payable and the first monthly payment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to 2 decimal p

Answer 1

Answer:

truck    26,000 debit

   note payable      26,000 credit

interext expense 130.00 debit

note payable       480.61 debit

             cash                           610.61 credit

Explanation:

issuance:

we record the entry of the truck into the books and we also record the promissory note signed.

interest payment:

principal x rate x time = interest

being rate 6% annual

and payment monthly we convert the rate:

6% = 0.06 annual --> 0.06/12 = 0.005 monthly --> 0.5%

26,000 x 0.5% = 130

610.61 - 130 = 480.61