How payments on long-term notes are divided into principal and interest with entries and examples.

May 5th, 2015
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Understand how payments on long-term notes are divided into principal and interest are recorded in accounts and examples are given.

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Question :Understand how payments on long term notes are divided into principal and interest?Answer: Notes payable are issued whenever bank loans are obtained. Notes payable usually require the borrower to pay an interest charge. Normally, the interest rate is stated separately from the principal amount of the note. To illustrate, assume that on November 1, Porter Company borrows $10,000 from its bank for a period of six months at an annual interest rate of 12%. Six months later on May 1, Porter Company will have to pay the bank the principal amount of $10,000 plus $600 inter

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