Question

On January 1, 2018, Fox Corporation signed an \(80,000, four-year, 4% note. The loan required Fox to make payments annually

on December 31 of \)20,000 principal plus interest.

1. Journalize the issuance of the note on January 1, 2018.

2. Journalize the first payment on December 31, 2018.

Short answer

The amount paid on the first payment of the note payable is $23,200.

Step-by-step solution

Definition of notes payable

The notes payable is a type of long-term liability in which a contract is signed between two parties.

Journal entries of notes payable

Date	Particulars	Debit	Credit
January 1, 2018	Cash	$80,000
	Notes Payable		$80,000
	(Receive cash from notes at 5%)
December 31, 2018	Notes Payable	$20,000
	Interest Expense ($80,000 * 4%)	$3,200
	Cash		$23,200
	(Being first payment of principal plus interest is made)