Question - On January 1, Year 1 Hatcher Co. borrowed $150,000 cash by signing a 10% installment note that is to be repaid with 3 annual year-end payments of $60,316, the first of which is due on December 31, Year 1.
(a) Prepare the company's journal entry to record the note's issuance.
(b) Prepare the journal entries to record the first and second installment payments. Hint: You will need to calculate interest expense and reduction to note payable for each 12 month period using the effective interest method. Show your work! The amount of the cash payment was given to you above in part (a).