On January 1, 2018, a business borrowed $18,000 on a five-year, 5% note payable. At December 31, 2018, the business should record Learning Objective 1 interest payable of $900. note receivable of $18,000. cash payment of $18,000. nothing. (The note is already on the books.)

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Answer 1

Textbook Question

Chapter 11, Problem 1QC

On January 1, 2018, a business borrowed $18,000 on a five-year, 5% note payable. At December 31, 2018, the business should record

Learning Objective 1

interest payable of $900.
note receivable of $18,000.
cash payment of $18,000.
nothing. (The note is already on the books.)

Expert Solution & Answer

To determine

Note Payable: Note Payable is a written agreement under which the Borrower obtains a certain sum of money from the Lender for a specific period of time. It carries a specific rate of interest. The borrowed sum along with interest is to be returned to the Lender after the expiry of the specified time period

To determine:

What entry should be record at the yearend i.e. December 31, 2018

Answer to Problem 1QC

Solution:

a. Interest payable of $900

Explanation of Solution

• Given:

On January 1, 2018, a business borrowed $18000 on a 5 year, 5% note payable.

• Formula used:

Interest Amount = Borrowed Sum * Interest Rate* Time Period

• Calculation:

Interest Amount = $18000*5%*1year

■ = $900

• According to the accrual basis of accounting, interest on note payable should be accrued in the books of accounts irrespective of its payment. It means although payment of interest has not been done, but the same must be recorded in the books of accounts because the interest is accrued on note payable. While recording this transaction, an expense is booked and a liability is created simultaneously. Here, in this question, the business should record interest payable of $900 at the year end. This is because the business has used the borrowed amount for 1year and for this usage of money, interest becomes payable to the lender. Although the interest has not been paid, but the same must be recorded in the books since it has been accrued. The Journal entry in this case would be:

Interest Expense Dr $900

To Interest Payable $900

(Being interest on note payable accrued for 1 year)

Conclusion

From the above discussion, we can conclude that the business should record interest payable of $900 at December 31, 2018 following the accrual basis of accounting.

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Students have asked these similar questions

(Learning Objective 6: Apply GAAP for notes receivable) Record the followingnote receivable transactions in the journal of Windham Golf. How much interest revenue didWindham earn this year? Use a 365-day year for interest computations, and round interestamounts to the nearest dollar. Windham Golf has a December 31 fiscal year-end.1 Loaned $17,000 cash to Jill Wateman on a one-year, 8% note.6 Performed service for Fairway Pro, receiving a 90-day, 10% note for$14,000.16Company.31 Accrued interest revenue for the year.Received a $5,000, six-month, 5% note on account from Paulson

(Learning Objective 3: Record note payable transactions) Dean Sales Companycompleted the following note payable transactions:2018Jul Purchased delivery truck costing $58,000 by issuing aone-year, 4% note payable.Dec 31 Accrued interest on the note payable.2019Jul 1 Paid the note payable at maturity.1Requirements1. How much interest expense must be accrued at December 31, 2018? (Round your answerto the nearest whole dollar.)2. Determine the amount of Dean Sales’ final payment on July 1, 2019.3. How much interest expense will Dean Sales report for 2018 and for 2019? (If needed,round your answer to the nearest whole dollar.)

(Learning Objective 3: Account for a short-term note payable) Jamison SportsAuthority purchased inventory costing $25,000 by signing a 12%, six-month, short-term notepayable. The purchase occurred on January 1, 2018. Jamison will pay the entire note (principaland interest) on the note’s maturity date of July 1, 2018. Journalize the company’s (a) purchaseof inventory and (b) payment of the note plus interest on July 1, 2018.

Answer 2

Textbook Question

Chapter 11, Problem 1QC

On January 1, 2018, a business borrowed $18,000 on a five-year, 5% note payable. At December 31, 2018, the business should record

Learning Objective 1

interest payable of $900.
note receivable of $18,000.
cash payment of $18,000.
nothing. (The note is already on the books.)

Expert Solution & Answer

To determine

Note Payable: Note Payable is a written agreement under which the Borrower obtains a certain sum of money from the Lender for a specific period of time. It carries a specific rate of interest. The borrowed sum along with interest is to be returned to the Lender after the expiry of the specified time period

To determine:

What entry should be record at the yearend i.e. December 31, 2018

Answer to Problem 1QC

Solution:

a. Interest payable of $900

Explanation of Solution

• Given:

On January 1, 2018, a business borrowed $18000 on a 5 year, 5% note payable.

• Formula used:

Interest Amount = Borrowed Sum * Interest Rate* Time Period

• Calculation:

Interest Amount = $18000*5%*1year

■ = $900

• According to the accrual basis of accounting, interest on note payable should be accrued in the books of accounts irrespective of its payment. It means although payment of interest has not been done, but the same must be recorded in the books of accounts because the interest is accrued on note payable. While recording this transaction, an expense is booked and a liability is created simultaneously. Here, in this question, the business should record interest payable of $900 at the year end. This is because the business has used the borrowed amount for 1year and for this usage of money, interest becomes payable to the lender. Although the interest has not been paid, but the same must be recorded in the books since it has been accrued. The Journal entry in this case would be:

Interest Expense Dr $900

To Interest Payable $900

(Being interest on note payable accrued for 1 year)

Conclusion

From the above discussion, we can conclude that the business should record interest payable of $900 at December 31, 2018 following the accrual basis of accounting.

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Answer 3

Textbook Question

Chapter 11, Problem 1QC

On January 1, 2018, a business borrowed $18,000 on a five-year, 5% note payable. At December 31, 2018, the business should record

Learning Objective 1

interest payable of $900.
note receivable of $18,000.
cash payment of $18,000.
nothing. (The note is already on the books.)

Expert Solution & Answer

To determine

Note Payable: Note Payable is a written agreement under which the Borrower obtains a certain sum of money from the Lender for a specific period of time. It carries a specific rate of interest. The borrowed sum along with interest is to be returned to the Lender after the expiry of the specified time period

To determine:

What entry should be record at the yearend i.e. December 31, 2018

Answer to Problem 1QC

Solution:

a. Interest payable of $900

Explanation of Solution

• Given:

On January 1, 2018, a business borrowed $18000 on a 5 year, 5% note payable.

• Formula used:

Interest Amount = Borrowed Sum * Interest Rate* Time Period

• Calculation:

Interest Amount = $18000*5%*1year

■ = $900

• According to the accrual basis of accounting, interest on note payable should be accrued in the books of accounts irrespective of its payment. It means although payment of interest has not been done, but the same must be recorded in the books of accounts because the interest is accrued on note payable. While recording this transaction, an expense is booked and a liability is created simultaneously. Here, in this question, the business should record interest payable of $900 at the year end. This is because the business has used the borrowed amount for 1year and for this usage of money, interest becomes payable to the lender. Although the interest has not been paid, but the same must be recorded in the books since it has been accrued. The Journal entry in this case would be:

Interest Expense Dr $900

To Interest Payable $900

(Being interest on note payable accrued for 1 year)

Conclusion

From the above discussion, we can conclude that the business should record interest payable of $900 at December 31, 2018 following the accrual basis of accounting.

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Answer 4

Textbook Question

Chapter 11, Problem 1QC

On January 1, 2018, a business borrowed $18,000 on a five-year, 5% note payable. At December 31, 2018, the business should record

Learning Objective 1

interest payable of $900.
note receivable of $18,000.
cash payment of $18,000.
nothing. (The note is already on the books.)

Expert Solution & Answer

To determine

Note Payable: Note Payable is a written agreement under which the Borrower obtains a certain sum of money from the Lender for a specific period of time. It carries a specific rate of interest. The borrowed sum along with interest is to be returned to the Lender after the expiry of the specified time period

To determine:

What entry should be record at the yearend i.e. December 31, 2018

Answer to Problem 1QC

Solution:

a. Interest payable of $900

Explanation of Solution

• Given:

On January 1, 2018, a business borrowed $18000 on a 5 year, 5% note payable.

• Formula used:

Interest Amount = Borrowed Sum * Interest Rate* Time Period

• Calculation:

Interest Amount = $18000*5%*1year

■ = $900

• According to the accrual basis of accounting, interest on note payable should be accrued in the books of accounts irrespective of its payment. It means although payment of interest has not been done, but the same must be recorded in the books of accounts because the interest is accrued on note payable. While recording this transaction, an expense is booked and a liability is created simultaneously. Here, in this question, the business should record interest payable of $900 at the year end. This is because the business has used the borrowed amount for 1year and for this usage of money, interest becomes payable to the lender. Although the interest has not been paid, but the same must be recorded in the books since it has been accrued. The Journal entry in this case would be:

Interest Expense Dr $900

To Interest Payable $900

(Being interest on note payable accrued for 1 year)

Conclusion

From the above discussion, we can conclude that the business should record interest payable of $900 at December 31, 2018 following the accrual basis of accounting.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Note Payable: Note Payable is a written agreement under which the Borrower obtains a certain sum of money from the Lender for a specific period of time. It carries a specific rate of interest. The borrowed sum along with interest is to be returned to the Lender after the expiry of the specified time period

To determine:

What entry should be record at the yearend i.e. December 31, 2018

Answer to Problem 1QC

Solution:

a. Interest payable of $900

Explanation of Solution

• Given:

On January 1, 2018, a business borrowed $18000 on a 5 year, 5% note payable.

• Formula used:

Interest Amount = Borrowed Sum * Interest Rate* Time Period

• Calculation:

Interest Amount = $18000*5%*1year

■ = $900

• According to the accrual basis of accounting, interest on note payable should be accrued in the books of accounts irrespective of its payment. It means although payment of interest has not been done, but the same must be recorded in the books of accounts because the interest is accrued on note payable. While recording this transaction, an expense is booked and a liability is created simultaneously. Here, in this question, the business should record interest payable of $900 at the year end. This is because the business has used the borrowed amount for 1year and for this usage of money, interest becomes payable to the lender. Although the interest has not been paid, but the same must be recorded in the books since it has been accrued. The Journal entry in this case would be:

Interest Expense Dr $900

To Interest Payable $900

(Being interest on note payable accrued for 1 year)

Conclusion

From the above discussion, we can conclude that the business should record interest payable of $900 at December 31, 2018 following the accrual basis of accounting.

Answer 8

Expert Solution & Answer

To determine

Note Payable: Note Payable is a written agreement under which the Borrower obtains a certain sum of money from the Lender for a specific period of time. It carries a specific rate of interest. The borrowed sum along with interest is to be returned to the Lender after the expiry of the specified time period

To determine:

What entry should be record at the yearend i.e. December 31, 2018

Answer to Problem 1QC

Solution:

a. Interest payable of $900

Explanation of Solution

• Given:

On January 1, 2018, a business borrowed $18000 on a 5 year, 5% note payable.

• Formula used:

Interest Amount = Borrowed Sum * Interest Rate* Time Period

• Calculation:

Interest Amount = $18000*5%*1year

■ = $900

• According to the accrual basis of accounting, interest on note payable should be accrued in the books of accounts irrespective of its payment. It means although payment of interest has not been done, but the same must be recorded in the books of accounts because the interest is accrued on note payable. While recording this transaction, an expense is booked and a liability is created simultaneously. Here, in this question, the business should record interest payable of $900 at the year end. This is because the business has used the borrowed amount for 1year and for this usage of money, interest becomes payable to the lender. Although the interest has not been paid, but the same must be recorded in the books since it has been accrued. The Journal entry in this case would be:

Interest Expense Dr $900

To Interest Payable $900

(Being interest on note payable accrued for 1 year)

Conclusion

From the above discussion, we can conclude that the business should record interest payable of $900 at December 31, 2018 following the accrual basis of accounting.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Note Payable: Note Payable is a written agreement under which the Borrower obtains a certain sum of money from the Lender for a specific period of time. It carries a specific rate of interest. The borrowed sum along with interest is to be returned to the Lender after the expiry of the specified time period

To determine:

What entry should be record at the yearend i.e. December 31, 2018

Answer 12

Answer to Problem 1QC

Solution:

a. Interest payable of $900

Answer 13

Explanation of Solution

• Given:

On January 1, 2018, a business borrowed $18000 on a 5 year, 5% note payable.

• Formula used:

Interest Amount = Borrowed Sum * Interest Rate* Time Period

• Calculation:

Interest Amount = $18000*5%*1year

■ = $900

• According to the accrual basis of accounting, interest on note payable should be accrued in the books of accounts irrespective of its payment. It means although payment of interest has not been done, but the same must be recorded in the books of accounts because the interest is accrued on note payable. While recording this transaction, an expense is booked and a liability is created simultaneously. Here, in this question, the business should record interest payable of $900 at the year end. This is because the business has used the borrowed amount for 1year and for this usage of money, interest becomes payable to the lender. Although the interest has not been paid, but the same must be recorded in the books since it has been accrued. The Journal entry in this case would be:

Interest Expense Dr $900

To Interest Payable $900

(Being interest on note payable accrued for 1 year)

Answer 14

Conclusion

From the above discussion, we can conclude that the business should record interest payable of $900 at December 31, 2018 following the accrual basis of accounting.

Answer 15

Ch. 11 - On January 1, 2018, a business borrowed $18,000 on...Ch. 11 - Prob. 2QC Ch. 11 - Prob. 3QC Ch. 11 - Prob. 4QC Ch. 11 - Prob. 5QC Ch. 11 - Prob. 6QC Ch. 11 - Prob. 7QC Ch. 11 - Prob. 8QC Ch. 11 - Prob. 9QC Ch. 11 - McDaniel and Associates reported the following...

On January 1, 2018, a business borrowed $18,000 on a five-year, 5% note payable. At December 31, 2018, the business should record Learning Objective 1 interest payable of $900. note receivable of $18,000. cash payment of $18,000. nothing. (The note is already on the books.)

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Answer to Problem 1QC

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