Question

Use the information in Exercise 10-10 to prepare the journal entries for Eagle to record the loan on January 1, 2017, and each of the four payments from December 31, 2017, through December 31, 2020.

Short answer

When the company borrows a loan, the cash account is debited, and notes payable are credited.

Step-by-step solution

Meaning of Installment Notes

Installment notes refer to a business's liability in which a business entity must pay various installment payments to the lender.

Step 2:Journal entries for Eagle to record the loan and four payments

Date	Accounts and Explanation	Debit ($)	Credit ($)
Jan 1, 2017	Cash	100,000
	Notes Payable		100,000
	(Toborrowed $100,000 by signing a 7% note)
Dec 31,2017	Interest Expense	7,000
	Notes Payable	22,523
	Cash		29,523
	(To record first installment payment)
Dec 31,2018	Interest Expense	5,423
	Notes Payable	24,100
	Cash		29,523
	(To record second installment payment)
Dec 31,2019	Interest Expense	3,736
	Notes Payable	25,787
	Cash		29,523
	(To record third installment payment)
Dec 31,2020	Interest Expense	1,933
	Notes Payable	27,590
	Cash		29,523
	(To record fourth installment payment)