On January 1, 2017, Eagle borrows $23,000 cash by signing a four-year, 9% installment note. The note requires four equal payments of $7,099, consisting of accrued interest and principal on December 31 of each year from 2017 through 2020. (Round your intermediate calculations and final answers to the nearest dollar amount.) Prepare the journal entries for Eagle to record the loan on January 1, 2017, and the four payments from December 31, 2017, through December 31, 2020.

Dr. Cr.

January 1, 2017

Cash $23,000

Account Payable $23,000

December 31, 2017

Account Payable $5,029

Interest Expense $2,070

Cash $7,099

December 31, 2018

Account Payable $5,482

Interest Expense $1,617

Cash $7,099

December 31, 2019

Account Payable $5,975

Interest Expense $1,124

Cash $7,099

December 31, 2020

Account Payable $6,514

Interest Expense $585

Cash $7,099

Explanation:

Installment of $7,099 is divided in interest and principal payments. As Interest payment is decreasing with the balance due is reducing each year due to principal payment with interest payment after paying interest the loan amount is zero after 4th installment. Loan Amortization schedule shows the amortization of loan and interest payment each year and their balances.

Loan Amortization schedule

Date Opening Interest @ 9% Principal Balance

January 1, 2017 $23,000 $23,000

Dec 31, 2017 $23,000 $2,070 $5,029 $17,971

Dec 31, 2018 $17,971 $1,617 $5,482 $12,489

Dec 31, 2019 $12,489 $1,124 $5,975 $6,514

Dec 31, 2020 $6,514 $585 $6,514 $0