Scrimiger Paints wants to upgrade its machinery and onSeptember 20 takes out a loan from the bank in theamount of $630,000. The terms of the loan are 3.0%annual interest rate and payable in 8 months. Interest isdue in equal payments each month.A. Compute the interest expense due each month. Ifrequired, round final answer to two decimal places.B. Show the journal entry to recognize the interestpayment on October 20, and the entry for payment of theshort-term note and final interest payment on May 20. Ifrequired, round final answers to two decimal places.If an amount box does not require an entry, leave it blank.Oct. 20May 20Accounts PayableAccounts ReceivableCashInterest ExpenseShort-Term Notes Payable

Interest: Interest is an amount that is paid by the borrower on the use of that borrowed money. In other words, it is a cost of borrowed money or the earning on loaned money. Generally, interest is calculated as a percentage of the principal borrowed.A. Computation of interest due each month: Total interest due for the loan = Loan amount * Interest rate p.a * Months/12months = $630,000 * 3.0% * 8/12 = $12,600. Interest due for each month = $12,600 / 8 months = $1,575. B. Journal Entries for payment of interest and final settlement: Date Account Title and Explanation Debit($) Credit($) Oct 20 Interest Expenses 1,575 Cash 1,575 (Interest payment entry passed) May 20 Interest Expenses 1,575 Loan 630,000 Cash 631,575 (Entry passed for the loan and final interest payment)

Business

Accounting

Scrimiger Paints wants to upgrade its machinery and on September 20 takes out a loan from the bank in the amount of $630,000. The terms of the loan are 3.0% annual interest rate and payable in 8 months. Interest is due in equal payments each month. A. Compute the interest expense due each month. If required, round final answer to two decimal places. $1 B. Show the journal entry to recognize the interest payment on October 20, and the entry for payment of the short-term note and final interest payment on May 20. If required, round final answers to two decimal places. If an amount box does not require an entry, leave it blank.

Scrimiger Paints wants to upgrade its machinery and on September 20 takes out a loan from the bank in the amount of $630,000. The terms of the loan are 3.0% annual interest rate and payable in 8 months. Interest is due in equal payments each month. A. Compute the interest expense due each month. If required, round final answer to two decimal places. $1 B. Show the journal entry to recognize the interest payment on October 20, and the entry for payment of the short-term note and final interest payment on May 20. If required, round final answers to two decimal places. If an amount box does not require an entry, leave it blank.

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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