This example shows the first installment of a note payable.

Interest Expense 3500

Notes payable 20,695

Cash 13,259

bengis restraints wants to expand their store but it needs some equipment (tables, chairs, plates, utensils etc.). They have signed a note for the purchase of the equipment for 70,000 and agreed to pay 8% interest on the note payable in yearly installments for 5 years. The interest and principle will be paid in equal installments. But the interest paid will decrease over time and the principal paid will increase with each installment. Please take this information show use how to record this note in the journal.