borrowed is fixed. on how much is overdrawn. The limit of overdrawing is an amo by the bank. For bank loan the business is required to make repayment according to agreed terms with the bank but for overdraft the business can deposit cash into the bank account to reduce the overdraft. (b) (i) borrowing of loan on 1 April 2019 2 e 9 Apr 1 Date Particulars Cash at bank Bank loan Dr $ 180 000 Cr $ 180 000 (ii) interest expense incurred at 31 December 2019, including the closing entry. Narrations are not required. [ Dr$ Cr$
borrowed is fixed. on how much is overdrawn. The limit of overdrawing is an amo by the bank. For bank loan the business is required to make repayment according to agreed terms with the bank but for overdraft the business can deposit cash into the bank account to reduce the overdraft. (b) (i) borrowing of loan on 1 April 2019 2 e 9 Apr 1 Date Particulars Cash at bank Bank loan Dr $ 180 000 Cr $ 180 000 (ii) interest expense incurred at 31 December 2019, including the closing entry. Narrations are not required. [ Dr$ Cr$
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![(a)
(b) (i) borrowing of loan on 1 April 2019.
019-2
Date
2019 Apr 1
depends on how much is overdrawn. The limit of overdrawing is an amount agreed
The amount of Bank loan borrowed is fixed. Whereas the amount of overdraft
by the bank. For bank loan the business is required to make repayment according to
agreed terms with the bank but for overdraft the business can deposit cash into the
bank account to reduce the overdraft.
Date
2019
Dec 31
31
Date
2020
Jan 1
Apr 1
Dec 31
31
Particulars
Cash at bank
Bank loan
REQUIRED
(ii) interest expense incurred at 31 December 2019, including the closing entry.
Narrations are not required. [
Particulars
Dr $
180 000
Interest expense (amount incurred for the year)
Interest expense payable
Particulars
Income summary (to close interest expense account) 6750
Interest expense
Murniz Restaurant provided the following information on its interest expense account.
Interest expense A/c
Dr
$
Interest expense payable
Cash at bank
Interest expense payable
Income summary
Cr $
180 000
9000
560
6750
Dr$ Cr$
6750
2810
Cr
$
6750
6750
Bal
$
6750 Cr
2250 Dr
2810 Dr
0
(c) Interpret the entries on the following dates.
(i) 1 January 2020
On 1 Jan 2020, the business reversed the adjustment made for interest expense
owed in the previous year of $6750.
(ii) 1 April 2020
On 1 July 2020, the business paid the bank interest of $9000 by cheque.
(iii) 31 December 2020, relating to the interest expense payable entry.
nts
[2]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F16712a02-0f21-4aec-828a-03654bfea983%2F05082709-0309-49fd-8f17-9d2f8f96e380%2Fp743l2l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:(a)
(b) (i) borrowing of loan on 1 April 2019.
019-2
Date
2019 Apr 1
depends on how much is overdrawn. The limit of overdrawing is an amount agreed
The amount of Bank loan borrowed is fixed. Whereas the amount of overdraft
by the bank. For bank loan the business is required to make repayment according to
agreed terms with the bank but for overdraft the business can deposit cash into the
bank account to reduce the overdraft.
Date
2019
Dec 31
31
Date
2020
Jan 1
Apr 1
Dec 31
31
Particulars
Cash at bank
Bank loan
REQUIRED
(ii) interest expense incurred at 31 December 2019, including the closing entry.
Narrations are not required. [
Particulars
Dr $
180 000
Interest expense (amount incurred for the year)
Interest expense payable
Particulars
Income summary (to close interest expense account) 6750
Interest expense
Murniz Restaurant provided the following information on its interest expense account.
Interest expense A/c
Dr
$
Interest expense payable
Cash at bank
Interest expense payable
Income summary
Cr $
180 000
9000
560
6750
Dr$ Cr$
6750
2810
Cr
$
6750
6750
Bal
$
6750 Cr
2250 Dr
2810 Dr
0
(c) Interpret the entries on the following dates.
(i) 1 January 2020
On 1 Jan 2020, the business reversed the adjustment made for interest expense
owed in the previous year of $6750.
(ii) 1 April 2020
On 1 July 2020, the business paid the bank interest of $9000 by cheque.
(iii) 31 December 2020, relating to the interest expense payable entry.
nts
[2]
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