Entries for Installment Note Transactions

On the first day of the fiscal year, Shiller Company borrowed $69,000 by giving a seven-year, 9% installment note to Soros Bank. The note requires annual payments of $13,885, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $6,210 and principal repayment of $7,675.

Journalize the entries to record the following:

a1.   Issued the installment note for cash on the first day of the fiscal year.

a2.   Paid the first annual payment on the note. For a compound transaction, if an amount box does not require an entry, leave it blank.

b. Explain how the notes payable would be reported on the balance sheet at the end of the first year.

Notes payable are reported as liabilities on the balance sheet. The portion of the note payable that is due within   is reported as a   . The remaining portion of the note payable that is not due within one year is reported as a(n)