On January 1, 2017, MM Co. borrows $340,000 cash from a bank and in return signs an 8% installment note for five annual payments of $85,155 each, with the first payment due one year after the note is signed.
1. Prepare the journal entry to record issuance of the note.
2. For the first $85,155 annual payment at December 31, 2017, what amount goes toward interest expense? What amount goes toward principal reduction of the note?