FINANCIAL ACCOUNTING FUND. W/CONNECT
FINANCIAL ACCOUNTING FUND. W/CONNECT
5th Edition
ISBN: 9781259693168
Author: Wild
Publisher: MCG
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Chapter 9, Problem 1BP

1.

To determine

Identify the maturity date for each of the three notes described.

1.

Expert Solution
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Explanation of Solution

Notes payable:

Notes Payable is a written promise to pay a certain amount on a future date, with certain percentage of interest. Companies use to issue notes payable to meet short-term financing needs.

Maturity date:

The date on which the borrower should pay the principal amount of loan, or bond, is referred to as maturity date.

ParticularsCompany FBank SBank C
Date of  note23rd   May15th July6th December
Terms of the note ( in days)6012045
Maturity date22nd  July12th November20th   January

(Table 1)

2.

To determine

Identify the interest due at maturity for each of the three notes.

2.

Expert Solution
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Explanation of Solution

Calculate the interest due at maturity for the note bearing an amount of $4,600.

Interest due at maturity for the note bearing $4,600 }(Principal amount× Annual interest rate × Time period)=$4,600×15%×60360=$115

Therefore, the interest due at maturity for the note bearing an amount of $4,600 is $115.

Calculate the interest due at maturity for the note bearing an amount of $12,000.

Interest due at maturity for the note bearing $12,000 }(Principal amount× Annual interest rate × Time period)=$12,000×10%×120360=$400

Therefore, the interest due at maturity for the note bearing an amount of $12,000 is $400.

Calculate the interest due at maturity for the note bearing an amount of $8,000.

Interest due at maturity for the note bearing $8,000 }(Principal amount× Annual interest rate × Time period)=$8,000×9%×45360=$90

Therefore, the interest due at maturity for the note bearing an amount of $8,000 is $90.

3.

To determine

Identify the interest expense to be recorded in the adjusting entry at the end of 2014.

3.

Expert Solution
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Explanation of Solution

Accrued interest on Bank C note at the end of 2014}=(Total interest on note × Time period for the term 2014)=$90×2545=$50

Therefore, the interest expense recorded in the adjusting entry at the end of 2014 is $50.

4.

To determine

Identify the interest expense to be recorded in 2015.

4.

Expert Solution
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Explanation of Solution

Interest on Bank C note in 2015}=(Total interest on note × Time period for the term 2015)=$90×2045=$40

Therefore, the interest expense recorded in 2015 is $40.

To determine

Prepare journal entry to record the given transaction and events for years 2014 and 2015.

Expert Solution
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Explanation of Solution

DateAccount title and ExplanationDebit in $Credit in $
April 22, 2014Merchandise  inventory5,000 
      Accounts payable to Company F 5,000
 (To record the purchase of merchandise on credit)  
    
May 23Accounts payable to  Company F5,000 
      Cash 400
      Notes payable-Company F 4,600
 (Paid $400 cash and gave a 60-day,
  15% note to extend due date on account)
  
    
July 15Cash12,000 
      Notes payable –Bank S 12,000
 (Borrowed cash with a 120-day, 10% note.)  
    
July 22Interest expense115 
 Notes payable –Company F4,600 
      Cash 4,715
 (Paid note with interest.)  
    
November 12Interest expense400 
 Notes payable –Bank S12,000 
      Cash 12,400
 (Paid note with interest.)  
    
December 6Cash8,000 
      Notes payable –Bank C 8,000
 (Borrowed cash with 45-day, 9% note.)  
    
December 31Interest expense50 
      Interest payable 50
 (Accrued interest on note payable.)  
    
January 20, 2015Interest expense40 
 Notes payable- Bank C         8,000 
 Interest payable50 
      Cash 8,090
 (Paid note with interest.)  

(Table 2)

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