Question

PLEASE USE CHARTS I PROVIDED

On January 1, 20Y2, Hebron Company issued a $242,000, five-year, 11% installment note to Ventsam Bank. The note requires annual payments of $65,478, beginning on December 31, 20Y2.

Journalize the entries to record the following transactions. Refer to the Chart of Accounts for exact wording of account titles.

20Y2
Jan.	1	Issued the note for cash at its face amount.
Dec.	31	Paid the annual payment on the note, which consisted of interest of $26,620 and principal of $38,858.
20Y5
Dec.	31	Paid the annual payment on the note, included $12,335 of interest. The remainder of the payment reduced the principal balance on the note.

CHART OF ACCOUNTS
Hebron Company
General Ledger
ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Inventory 141 Office Supplies 142 Store Supplies 151 Prepaid Insurance 191 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends	REVENUE 410 Sales 610 Interest Revenue 611 Gain on Redemption of Bonds EXPENSES 510 Cost of Goods Sold 515 Credit Card Expense 516 Cash Short and Over 521 Sales Salaries Expense 522 Office Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 534 Selling Expenses 535 Rent Expense 536 Insurance Expense 537 Office Supplies Expense 538 Store Supplies Expense 541 Bad Debt Expense 561 Depreciation Expense-Store Equipment 562 Depreciation Expense-Office Equipment 590 Miscellaneous Expense 710 Interest Expense 711 Loss on Redemption of Bonds

a. Journalize the entries to record the transactions for the year 20Y2. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

b. Journalize the entries to record the transactions for the year 20Y5. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3

Answer 1

The year 20Y2 and 20Y5 is taken as year 2012 and 2015 respectively.

The provision for interest payable has not been done as it has been directly paid on 31st December at the end of the respective year.

The entry for payment of Interest and repayment of Note has been recorded.

The Accounting equation has been appended along with the journal entry .

The schedule of calculation of Interest and principal repayment has been annexed.

DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
2012
1.1.2012	Cash A/c		$                    242,000		242000(Cash)	242000( Notes Payable)
	To   Notes Payable			$          242,000
	( Recorded 11 % notes payable to Ventsam bank)
31.12.2012	Interest expense		$                      26,620
	Notes payable		$                      38,858		-65478( Reduce from cash)	-38858 from Note payable	- 26620 from Income statement
	To Cash			$           65,478
	(Recorded Interest and repayment of Note payable at the end of the year)
DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
2015
31.12.2015	Interest expense		$                      12,335
	Notes payable		$                      53,143		-65478( Reduce from cash)	-53143 from Note payable	-12335 from Income statement
	To Cash			$           65,478
	(Recorded Interest and repayment of Note payable at the end of the year)

Schedule of Repayment of Interest and Principal on Notes Payable
Year	Principal	Intt @ 11%	Repayment of Principal( 65478-Interest )	Clo Bal ( Principal-Repayment)
2012	$     242,000	$           26,620	$           38,858	$     203,142
2013	$     203,142	$           22,346	$           43,132	$     160,010
2014	$     160,010	$           17,601	$           47,877	$     112,133
2015	$     112,133	$           12,335	$           53,143	$       58,990
2016	$       58,990	$             6,488	$           58,990	$             -