Question

Problem:

On November 1, 2019, Norwood borrows $200,000 cash from a bank by signing a five-year installment note bearing 8% interest. The note requires equal payments of $50,091 each year on October 31.

Question:

Record the first installment payment on October 31, 2020. Assume no reversing entries were prepared. (PS i already looked for the answer in chegg and tried them but it keeps saying it's wrong... the two accounts used in this problem are interest expense and interest payable. I got interest expense which is the $13,333, but interest payable isn't the same and I cannot seem to find the right answer)

Answer 1

First I am providing Calculation for Interest Expense for the year ended December 31, 2019 and Interest Expense for the yer 2020 upto date of first installment on October 31.

Here is Calculation Part

Now I am Providing Journal Entry for accrued interest expense , it will tell you amount of Interest Payable.

See Journal Entry Below

Finally the Journal Entry for the payment of First Installment as on October 31, 2020 as follows