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17 June, 21:20

On January 1, 2021, Corvallis Carnivals borrows $10,000 to purchase a delivery truck by agreeing to a 6%, three-year loan with the bank. Payments of $304.22 are due at the end of each month, with the first installment due on January 31, 2021. Record the issuance of the note payable and the first monthly payment.

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  1. 17 June, 21:50
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    The journal entries are as follows:

    (i) On January 1, 2021

    Delivery Truck A/c Dr. $10,000

    To 6% loan note payable $10,000

    (To record the issuance of note payable)

    (ii) On January 31, 2021

    6% loan note payable A/c Dr. $254.22

    Interest expense A/c Dr. $50

    To cash $304.22

    (To record the first month payment)

    Workings:

    Interest expense = $10,000 * 6% * (1/12)

    = $50
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