On April 1, 2021, Baker Construction, Inc. signed a note for a loan from its bank. The following are the terms and other information pertaining to the loan: Amount of the loan $100,000 How long the loan is for (the term of the loan) 1 year April 1, 2021 June 30, 2021 Date the loan was made Date of first interest payment to the bank Amount of interest charged by the bank for April Amount of interest charged by the bank for May Amount of interest charged by the bank for June $550 $568 $550 The following is a partial list of the accounts in Baker's General Ledger. These are the only accounts you need for this problem. D Cash D Note Payable D Interest Payable D Interest Expense

On April 1, 2021, Baker Construction, Inc. signed a note for a loan from its bank. The following are the terms and other information pertaining to the loan: Amount of the loan $100,000 How long the loan is for (the term of the loan) 1 year April 1, 2021 June 30, 2021 Date the loan was made Date of first interest payment to the bank Amount of interest charged by the bank for April Amount of interest charged by the bank for May Amount of interest charged by the bank for June $550 $568 $550 The following is a partial list of the accounts in Baker's General Ledger. These are the only accounts you need for this problem. D Cash D Note Payable D Interest Payable D Interest Expense

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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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

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On April 1, 2021, Baker Construction, Inc. signed a note for a loan from its bank. The following are
the terms and other information pertaining to the loan:
Amount of the loan
How long the loan is for (the term of the loan)
$100,000
1 year
Date the loan was made
Date of first interest payment to the bank
Amount of interest charged by the bank for April
April 1, 2021
June 30, 2021
Amount of interest charged by the bank for May
$550
Amount of interest charged by the bank for June
$568
$550
The following is a partial list of the accounts in Baker's General Ledger. These are the only
accounts you need for this problem.
D Cash
D Note Payable
D Interest Payable
D Interest Expense

Take-Out a Loan -- Accrue Interest on the Loan -- Pay Interest
Requirement 1 -- April 1 get the loan from the bank
Date
Account Name
Debit
Credit
Requirement 2 -- April 30 interest accrual adjusting entry
Date
Account Name
Debit
Credit
orequired, put
Requirement 3 -- May 31 interest accrual adjusting entry
Date
Account Name
Debit
Credit
y Daker should make
ptomber's e no entry is required
202
No Entry Reaued on the
Requirement 4 -- Payment of the April, May, and June interest to the bank
Date
Account Name
Debit
Credit

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