Question

Flamingo Company borrows $30,000 using a five-year, long-term installment note payable. The rate on the note is 5 percent and Flamingo agrees to make monthly payments of $566.14. When Flamingo records its first payment on the note payable, what will the journal entry look like (without the numbers).

Answer 1

Interest expense = 30,000*5%*1/12

Interest expense = 30,000*0.00416666667

Interest expense = $125.0000001

The journal entry will be:

Description Debit Credit

Interest expense $125

Notes payable $441.14

Cash $566.14