Chapter 12, Problem 12.1SE

1.

To determine

Long-Term Notes Payable

Long-term notes payable refers to the obligation of the company in the form of notes to be paid after one year or one operating cycle whichever is longer. Generally the long-term notes payable is reported in the long-term liabilities section of the balance sheet.

Rules of debit and credit:

“An increase in an asset account, an increase in an expense account, a decrease in liability account, and a decrease in a revenue account should be debited.

Similarly, an increase in liability account, an increase in a revenue account and a decrease in an asset account, a decrease in an expenses account should be credited”.

To Journalize: The issuance of the note on January 1, 2016.

2.

To determine

To Journalize: First note payment on December 31, 2016.