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5 September, 21:07

On January 1, 2012, Corvallis Carnivals borrows $20,000 to purchase a delivery truck by agreeing to a 7%, four-year loan with the bank. Payments of $478.92 are due at the end of each month, with the first installment due on January 31, 2012. Record the issuance of the note payable and the first monthly payment.

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  1. 5 September, 22:15
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    The journal entries are as follows

    On January 1, 2012

    Cash $20,000

    To Note payable $20,000

    (Being the issuance of the note payable is recorded)

    On January 31, 2012

    Interest expense $116.67

    Note payable $362.25

    To Cash $478.92

    (Being the first monthly payment is recorded)

    The interest expense is as follows

    = Borrowed amount * monthly interest rate

    = $20,000 * 0.5833%

    = $116.67
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