On January 1, Year 1, Bryson Company obtained a $147,750, four-year, 7% installment note from Campbell Bank. The note requires annual payments of $43,620, beginning on December 31, Year 1. Prepare an amortization table for this installment note, similar to the one presented in Exhibit 4. Journalize the entries for the issuance of the note and the four annual note payments. Describe how the annual note payment would be reported in the Year 1 income statement.

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

1) The amortization schedule is presented on the attachment below:

2).

Journal Entry

1 JanCash A/c      Dr. $147,750  

   To Notes payable A/c      $147,750

(Being the cash received is recorded)

31 Dec   Interest expense A/c    Dr. $10,342.50  

   Notes payable A/c      $33,277.50

 To Cash A/c    $43,620

(Being the annual payment of installment including interest is recorded)

31 Dec   Interest expense A/c    Dr. $8,013.08  

   Notes payable A/c      $33,606.93

 To Cash A/c    $43,620

(Being the annual payment of installment including interest is recorded)

31 Dec   Interest expense A/c    Dr. $5,520.59  

   Notes payable A/c      $38,099.41

 To Cash A/c    $43,620

(Being the annual payment of installment including interest is recorded)

31 Dec   Interest expense A/c    Dr. $2,853.83  

   Notes payable A/c      $40,766.17

 To Cash A/c    $43,620

(Being the annual payment of installment including interest and setting off liabilities is recorded)

3).

                                                            Bryson Company

                                                           Income Statement

Particular  Amount ($)

Revenue  -

Expenses  

Less - Interest expense10,342.50

Less - Other expenses-

Net Income-