E10-1 (Algo) Determining Financial Statement Effects of Transactions Involving Notes Payable [LO 10-2] Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. For example, Mitt Corporation builds up its inventory to meet the needs of retailers selling to Christmas shoppers. A large portion of Mitt Corporation sales are on credit. As a result, Mitt Corporation often collects cash from its sales several months after Christmas. Assume on November 1, 2021, Mitt Corporation borrowed $8.4 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 8.50 percent payable at maturity. The accounting period ends December 31. Required: 1. Indicate the accounts, amounts, and effects of the (a) issuance of the note on November 1; (b) impact of the adjusting entry on December 31, 2021; and (c) the payment of the note and interest on April 30, 2022, on the accounting equation. (Do not round intermediate calculations. Enter your answers in whole dollars. Enter any decreases to assets, liabilities, or stockholders equity with a minus sign.) Date a. November 1, 2021 b. December 31, 2021 c. April 30, 2022 Assets = Liabilities Stockholders' Equity
E10-1 (Algo) Determining Financial Statement Effects of Transactions Involving Notes Payable [LO 10-2] Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. For example, Mitt Corporation builds up its inventory to meet the needs of retailers selling to Christmas shoppers. A large portion of Mitt Corporation sales are on credit. As a result, Mitt Corporation often collects cash from its sales several months after Christmas. Assume on November 1, 2021, Mitt Corporation borrowed $8.4 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 8.50 percent payable at maturity. The accounting period ends December 31. Required: 1. Indicate the accounts, amounts, and effects of the (a) issuance of the note on November 1; (b) impact of the adjusting entry on December 31, 2021; and (c) the payment of the note and interest on April 30, 2022, on the accounting equation. (Do not round intermediate calculations. Enter your answers in whole dollars. Enter any decreases to assets, liabilities, or stockholders equity with a minus sign.) Date a. November 1, 2021 b. December 31, 2021 c. April 30, 2022 Assets = Liabilities Stockholders' Equity
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter8: Revenue Recognition, Receivables, And Advances From Customers
Section: Chapter Questions
Problem 42P
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