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On 12/31/19 we sign a 3-year note receivable for $50,000 in payment for services that we...

On 12/31/19 we sign a 3-year note receivable for $50,000 in payment for services that we provided to a client. This amount does not include interest. Annual year-end payments $20,106 begin on 12/31/20. The payments include both principal and interest at 10%.

  1. Prepare an amortization table
  2. Prepare the journal entry for 12/31/19
  3. Prepare the journal entry for 12/31/20
  4. Prepare the journal entry for 1/1/21
  5. Prepare the journal entry for 1/1/22

Solutions

Expert Solution

Date Beginning bal. Annual payment Interest Principal Ending bal.
12/31/19 $0 $0 $0 $0 $50,000
12/31/20 $50,000 $20,106 $5,000 $15,106 $34,894
1/1/21 $34,894 $20,106 $3,489.40 $16,616.60 $18,277.40
1/1/22 $18,277.40 $20,106 $1,827.74 $18,277.40 $0
Total $10,317.14 $50,000

12/31/19

Notes receivable account......................Debit $50,000

To Service revenue account...........Credit $50,000

12/31/20

Cash account ................................Debit $20,106

To Notes receivable account.......Credit $15,106

To Interest revenue account.........Credit $5,000

1/1/21

Cash account ................................Debit $20,106

To Notes receivable account.......Credit $16,616.60

To Interest revenue account.........Credit $3,489.40

12/31/20

Cash account ................................Debit $20,106

To Notes receivable account.......Credit $18,277.40

To Interest revenue account.........Credit $1,827.74

ekkarill92 answered 1 year ago
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