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Problem 8-9 (AICPA Adapted) On January 1, 2021, Heritage Company had a note payable to bank in the amount P2,800,000. Transactions during 2021 and other information relating to liabilities are: a. Principal amount of the note payable to bank is P2,800,000 and bears a 12% interest. The note is dated April 1, 2020 and is payable in four equal annual installments beginning April 1, 2021. The first principal and interest payment was made on April 1, 2021. b. On July 1, 2021, the entity issued for P1,774,000 a P2,000,000 face amount note payable to a wealthy shareholder. The note was dated July 1, 2021 and matures on July 1, 2022. No explicit interest rate is stated in the note and the' entire face amount of the note is payable at maturity date. Required: a Prepare journal entries for 2021. 0. Compute the total current liabilities on December 31, 2021. C. Determine the interest expense for 2021.

Problem 8-9 (AICPA Adapted) On January 1, 2021, Heritage Company had a note payable to bank in the amount P2,800,000. Transactions during 2021 and other information relating to liabilities are: a. Principal amount of the note payable to bank is P2,800,000 and bears a 12% interest. The note is dated April 1, 2020 and is payable in four equal annual installments beginning April 1, 2021. The first principal and interest payment was made on April 1, 2021. b. On July 1, 2021, the entity issued for P1,774,000 a P2,000,000 face amount note payable to a wealthy shareholder. The note was dated July 1, 2021 and matures on July 1, 2022. No explicit interest rate is stated in the note and the' entire face amount of the note is payable at maturity date. Required: a Prepare journal entries for 2021. 0. Compute the total current liabilities on December 31, 2021. C. Determine the interest expense for 2021.

FINANCIAL ACCOUNTING
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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Problem 8-9 (with solution/explanation)

Problem 8-9 (AICPA Adapted) On January 1, 2021, Heritage Company had a note payable to bank in the amount P2,800,000. Transactions during 2021 and other information relating to liabilities are: a. Principal amount of the note payable to bank is P2,800,000 and bears a 12% interest. The note is dated April 1, 2020 and is payable in four equal annual installments beginning April 1, 2021. The first principal and interest payment was made on April 1, 2021. b. On July 1, 2021, the entity issued for P1,774,000 a P2,000,000 face amount note payable to a wealthy shareholder. The note was dated July 1, 2021 and matures on July 1, 2022. No explicit interest rate is stated in the note and the entire face amount of the note is payable at maturity date. Required: a Prepare journal entries for 2021. . Compute the total current liabilities on December 31, 2021. C. Determine the interest expense for 2021. 281
Transcribed Image Text:Problem 8-9 (AICPA Adapted) On January 1, 2021, Heritage Company had a note payable to bank in the amount P2,800,000. Transactions during 2021 and other information relating to liabilities are: a. Principal amount of the note payable to bank is P2,800,000 and bears a 12% interest. The note is dated April 1, 2020 and is payable in four equal annual installments beginning April 1, 2021. The first principal and interest payment was made on April 1, 2021. b. On July 1, 2021, the entity issued for P1,774,000 a P2,000,000 face amount note payable to a wealthy shareholder. The note was dated July 1, 2021 and matures on July 1, 2022. No explicit interest rate is stated in the note and the entire face amount of the note is payable at maturity date. Required: a Prepare journal entries for 2021. . Compute the total current liabilities on December 31, 2021. C. Determine the interest expense for 2021. 281
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