Answer:
January 1, 2021, vehicle purchased on credit
Dr Vehicles 50,000
Cr Notes payable 50,000
January 31, 2021, first installment
Dr Notes payable 578.64
Dr Interest expense 250
Cr Cash 828.64
Interest expense = $50,000 x 6% x 1/12 = $250
February 28, 2021, second installment
Dr Notes payable 579.89
Dr Interest expense 248.75
Cr Cash 828.64
Interest expense = $49,750 x 6% x 1/12 = $248.75
Generally loans are made on a 360 day year basis, that means that the monthly interest expense is always calculated as 1/12 of the annual interest charge.
