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31 December, 20:14

Tolino Company signed a 5-year note payable on January 1, 2019, of $200,000. The note requires annual principal payments each December 31 of $40,000 plus interest of 6%. The entry to record the annual payment on December 31, 2020, includes:

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  1. 31 December, 20:35
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    The following journal entry will be passed in the books of accounts and the interest expense is calculated to an amount of $9600

    Explanation:

    Given dа ta:

    amount of note: $200000, annual principal payments to be made each year at December 31st = $40000, interest amount to be charged = 6 percent, duration of note = 5 years

    the following calculation is made in order to find out the amount of interest:

    Amount of note minus principal payment multiply with rate of interest

    now, putting the figures in formula:

    interest = 200000 minus 40000 = $160000 multiply with. 06 = $9600

    Thus, the interest amount = $9600

    The interest expense will be debited with an amount of $9600 in the books of accounts.
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