On January 1, Year 1, Luzak Company issued a $120,000, five-year, 6% installment note to McGee Bank. The note requires annual payments of $28,488, beginning on December 31, Year 1. Journalize the entries to record the following:
Year 1
Jan. 1. Issued the note for cash at its face amount.
Dec. 31. Paid the annual payment on the note, which consisted of interest of $7,200 and principal of $21,288.
Year 4
Dec. 31. Paid the annual payment on the note, including $3,134 of interest. The remainder of the payment reduced the principal balance on the note.