On November 1, Year 1, a company borrows $49,000 cash from Community Savings and Loan. The company signs a three-month, 6% note payable. Interest is payable at maturity. The company's year-end is December 31. Required: 1.-3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
On November 1, Year 1, a company borrows $49,000 cash from Community Savings and Loan. The company signs a three-month, 6% note payable. Interest is payable at maturity. The company's year-end is December 31. Required: 1.-3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Journal Entry Exercise**
On November 1, Year 1, a company borrows $49,000 cash from Community Savings and Loan. The company signs a three-month, 6% note payable. Interest is payable at maturity. The company’s year-end is December 31.
**Required Actions:**
1. Record the necessary entries in the Journal Entry Worksheet below.
- If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.
**Journal Entry Worksheet:**
1. **November 01**
- **Debit:** Cash $49,000
- **Credit:** Notes Payable $49,000
2. **December 31**
- **Debit:** Interest Expense $490
- **Credit:** Interest Payable $490
3. **February 01**
- **Debit:** Notes Payable $49,000
- **Debit:** Interest Payable $735
- **Credit:** Cash $49,735
**Explanation of Entries:**
- **November 01**: The company records the borrowing of cash by debiting Cash and crediting Notes Payable.
- **December 31**: An adjusting entry is made to recognize the accrued interest expense, debiting Interest Expense and crediting Interest Payable.
- **February 01**: Upon maturity, payment of the note and interest is recorded by debiting Notes Payable and Interest Payable, and crediting Cash for the total amount.
This exercise helps reinforce the process of recording transactions involving borrowing and repaying a note payable, with attention to interest recognition at year-end.
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