Q4. National Bank of Pakistan agrees to lend Rs. 100,000,000 on September 1, 2020, if PepsiCo. signs a Rs. 100,000, 000 12.5%, four-month note maturing on January 1. Instructions Prepare the entry on September 1st.Prepare the adjusting entry on Dec. 31st, assuming monthly adjusting entries have not been made.Prepare the entry at maturity (Jan. 1, 2015).

Answered: National Bank of Pakistan agrees to…

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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Q4. National Bank of Pakistan agrees to lend Rs. 100,000,000 on September 1, 2020, if PepsiCo. signs a Rs. 100,000, 000 12.5%, four-month note maturing on January 1.

Instructions

Prepare the entry on September 1^st.
Prepare the adjusting entry on Dec. 31^st, assuming monthly adjusting entries have not been made.
Prepare the entry at maturity (Jan. 1, 2015).

Expert Solution

Step 1

Interest accrued on December 31 = Face value of note x rate of interest x no. Of months/12

= Rs. 100000000 x 12.5% x 4/12

= Rs. 4166667

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