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    sexydrea39's Avatar
    sexydrea39 Posts: 3, Reputation: 1
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    #1

    Oct 22, 2008, 07:19 PM
    Long-term note payable
    Mass confusion!

    I am recording a long-term note payable of a borrowed amt of 200,000 on a 4 yr, 9% note payable that calls for annual installment payment of 50,000 principal plus interest. Monies where borrowed on Feb 28 and I am recording on Feb 28 for the installment

    This is how I recorded it!

    Interest Expense debit 50,000
    Long-Term Note Payable debit 16,560

    Cash credit 66,560

    Is this correct?
    MLSNC's Avatar
    MLSNC Posts: 158, Reputation: 17
    Junior Member
    		  
    #2

    Oct 22, 2008, 07:45 PM

    Your narrative says you paid $50,000 on the principal plus interest but you only reduced the note balance by $16,560. It would seem that the Long-Term Note should be debited for the $50,000. Sorry would need more info to determine what the interest would be. Interest due for the first payment would be $18,000 for a full year.
    sexydrea39's Avatar
    sexydrea39 Posts: 3, Reputation: 1
    New Member
    		  
    #3

    Oct 22, 2008, 08:39 PM

    This is the question

    On Feb 28, 2006 I borrowed 200,000 on a 4-year, 9% note payable that calls for annual installment payments of 50,000 principal plus interest.

    Then

    On Feb 28, 2007 I paid the first installment and interest for one year on the 4-year note payable.

    This is how I recorded it all

    Feb 28 Long-term note payable debit of 200,000
    Current portion of note payable credit 200,000
    Then I went to record the first installment and interest as follows

    28-Feb Long-Term Note Payable debit 50,000
    Interest Payable debit 16,560
    Interest Expense debit 18,000
    Cash credit 84,560
    Record first installment payment
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