On January 1, Luther Co. issue

On January 1, Luther Co. issued a $1,000,000, five-year, 8%installment note payable with payments of $250,456 principal plusinterest due on January 1 of each year for the next five years.


1. Prepare the adjusting journalentry at December 31 to accrue interest for the year. Refer to theChart of Accounts for exact wording of account titles.
2. Show the account(s) andamount(s) and where it(they) will appear on a multi-step incomestatement prepared on December 31.

Show the account(s) and amount(s) and where it(they) willappear on a classified balance sheet prepared on December31.

Show the account(s) and amount(s) and where it(they) will appearon a classified balance sheet prepared on December 31. Refer to thelists of Amount Descriptions for the exact wording of the answerchoices for text entries.

Partial Balance Sheet


Current Liabilities:




Long-Term Liabilities:



Year Beginning Balance Total Payment Interest payment Principal payment Ending Balance
1 $1,000,000 $250,456 $80,000 $170,456 $829,544
2 $829,544 $250,456 $66,363 $184,093 $645,451
3 $645,451 $250,456 $51,636 $198,820 $446,630
4 $446,630 $250,456 $35,730 $214,726 $231,904
5 $231,904 $250,456 $18,552 $231,904 $0
C=Interest Payment (Calculated using excel IPMT function withRate=8%,Per=N, Nper=5, PV=-1000000
D=Principal payment (Calculated using excel PPMT function withRate=8%,Per=N, Nper=5, PV=-1000001
Date Account Title Debit Credit
.Dec 31 , Year 1 Interest expense $80,000
Interest payable $80,000
.Dec 31 , Year 2 Interest expense $66,363
Interest payable $66,363
.Dec 31 , Year 3 Interest expense $51,636
Interest payable $51,636
.Dec 31 , Year 4 Interest expense $35,730
Interest payable $35,730
.Dec 31 , Year 5 Interest expense $18,552
Interest payable $18,552
Cost of goods sold
Gross profit
Operating expenses
Profit before interest and taxes
Interest expenses $80,000
Profit before taxes after interest
Tax expenses
Net Profit
Partial Balance Sheet at endof December Year1
1 Current Liabilities:
2 Current portion of long termliabilities $184,093
4 Long-Term Liabilities:
5 Long term liabilities $645,451

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