On January 1, Year 1 a company borrowed $70,000 cash by signing a 9% installment note that is to be repaid with 4 annual year-end payments of $21,607, the first of which is due on December 31, Year 1.(a) Prepare the company's journal entry to record the note's issuance.(b) Prepare the journal entries to record the first and second installment payments.
What will be an ideal response?
| a) | ? | ? | ? |
| Year 1 | ? | ? | ? |
| Jan. 1 | Cash | 70,000 | ? |
| ? | Notes Payable | ? | 70,000 |
| b) | ? | ? | ? |
| Year 1 | ? | ? | ? |
| Dec. 31 | Notes Payable | 15,307 | ? |
| ? | Interest Expense ($70,000 * 0.09) | 6,300 | ? |
| ? | Cash | ? | 21,607 |
| Year 2 | ? | ? | ? |
| Dec. 31 | Notes Payable | 16,685 | ? |
| ? | Interest Expense ($54,693 * 0.09) | 4,922 | ? |
| ? | Cash | ? | 21,607 |
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