Greeson Corp. signed a three-month, zero-interest-bearing note on November 1, 2017 for the purchase of $500,000 of inventory. The face value of the note was $507,800. Greeson used a “Discount of Note Payable” account to initially record the note. Assuming that the discount will be amortized equally over the 3-month period and that there was no adjusting entry made for November. In the December 31, 2017 adjusting entry, what is the amount (if any) of the credit to Discount on Notes Payable?

Long term debt obligation raised from financial service organization is known as notes payable. It is written promise to pay a stated sum at specified future dates called the maturity.Calculation: Value of inventory purchased = $500,000 Face value of note = $507,800 Discount on note payable = Face value of note - Value of inventory purchased = 507,800 - 500,000 = $7,800The maturity period of note = 3 months At December 31, 2017, interest expense will be debited and discount on note payable will be credited by = 7,800 x 2÷ 3 = $5,200

Answered: hat the discount will be amortized…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Greeson Corp. signed a three-month, zero-interest-bearing note on November 1, 2017 for the purchase of $500,000 of inventory. The face value of the note was $507,800. Greeson used a “Discount of Note Payable” account to initially record the note. Assuming that the discount will be amortized equally over the 3-month period and that there was no adjusting entry made for November. In the December 31, 2017 adjusting entry, what is the amount (if any) of the credit to Discount on Notes Payable?

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