On March 1,2015,Vantage Services issued a 5% long-term notes payable for $20,000.It is payable over a 10-year term in $2,000 principal installments on March 1 of each year,beginning March 1,2016.Each yearly installment will include both principal repayment of $2,000 and interest payment for the preceding one-year period.The journal entry to pay the first installment will include a debit to the Interest Expense account for $1,000.

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This is because the installment payment of $2,000 includes both principal repayment and interest payment for the preceding one-year period. Therefore, when the first installment is paid on March 1, 2016, it will include an interest payment of $1,000 (5% of $20,000) for the preceding one-year period (March 1, 2015, to February 28, 2016). As a result, the journal entry to pay the first installment will include a debit to the Interest Expense account for $1,000.

On March 1,2015,Vantage Services Issued a 5% Long-Term Notes Payable