Consider the following note payable transactions of Cigliano Video Productions. 2017 May 1 Purchased equipment costing $30,000 by issuing a one-year, 3% note payable. Dec. 31 Accrued interest on the note payable. 2018 May 1 Paid the note payable plus interest at maturity.
Consider the following note payable transactions of Cigliano Video Productions. 2017 May 1 Purchased equipment costing $30,000 by issuing a one-year, 3% note payable. Dec. 31 Accrued interest on the note payable. 2018 May 1 Paid the note payable plus interest at maturity.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Consider the following note payable transactions of Cigliano Video Productions.
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2017
|
|
|
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May
|
1
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Purchased equipment costing $30,000 by issuing a one-year, 3% note payable.
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|
Dec.
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31
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Accrued interest on the note payable.
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2018
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|
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May
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1
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Paid the note payable plus interest at maturity.
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Transcribed Image Text:### Financial Transaction Example: May 1, 2017 Equipment Purchase
**Transaction Details:**
- **Date:** May 1, 2017
- **Description:** Purchased equipment costing $30,000 by issuing a one-year, 3% note payable.
#### Journal Entry
<table>
<tr>
<th>Date</th>
<th>Accounts and Explanation</th>
<th>Debit</th>
<th>Credit</th>
</tr>
<tr>
<td>2017</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>May 1</td>
<td>Equipment<br>Notes Payable<br><i>Purchased equipment in exchange for one-year, 3% note.</i></td>
<td></td>
<td></td>
</tr>
</table>
**Explanation:**
- **Debit:** This entry represents the increase in the Equipment account, reflecting an addition of $30,000 to assets.
- **Credit:** This entry is recorded under Notes Payable, indicating a liability of $30,000 to be paid back within one year at an interest rate of 3%.
**Visualization/Diagram:**
- The table consists of four columns: Date, Accounts and Explanation, Debit, and Credit.
- The transaction date is May 1, 2017.
- The Equipment account is debited, while the Notes Payable account is credited.
- The table cell under "Accounts and Explanation" explains the nature of the transaction, noting that equipment was bought using a one-year note with a 3% interest rate.
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