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1.
Identify the maturity date for each of the three notes described.
1.
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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.
Particulars | Company F | Bank S | Bank C |
Date of note | 23rd May | 15th July | 6th December |
Terms of the note ( in days) | 60 | 120 | 45 |
Maturity date | 22nd July | 12th November | 20th January |
(Table 1)
2.
Identify the interest due at maturity for each of the three notes.
2.
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Explanation of Solution
Calculate the interest due at maturity for the note bearing an amount of $4,600.
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.
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.
Therefore, the interest due at maturity for the note bearing an amount of $8,000 is $90.
3.
Identify the interest expense to be recorded in the
3.
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Explanation of Solution
Therefore, the interest expense recorded in the adjusting entry at the end of 2016 is $50.
4.
Identify the interest expense to be recorded in 2017.
4.
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Explanation of Solution
Therefore, the interest expense recorded in 2017 is $40.
Prepare
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Explanation of Solution
Date | Account title and Explanation | Debit in $ | Credit in $ |
April 22, 2016 | Merchandise inventory | 5,000 | |
Accounts payable to Company F | 5,000 | ||
(To record the purchase of merchandise on credit) | |||
May 23 | Accounts payable to Company F | 5,000 | |
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 15 | Cash | 12,000 | |
Notes payable –Bank S | 12,000 | ||
(Borrowed cash with a 120-day, 10% note.) | |||
July 22 | Interest expense | 115 | |
Notes payable –Company F | 4,600 | ||
Cash | 4,715 | ||
(Paid note with interest.) | |||
November 12 | Interest expense | 400 | |
Notes payable –Bank S | 12,000 | ||
Cash | 12,400 | ||
(Paid note with interest.) | |||
December 6 | Cash | 8,000 | |
Notes payable –Bank C | 8,000 | ||
(Borrowed cash with 45-day, 9% note.) | |||
December 31 | Interest expense | 50 | |
Interest payable | 50 | ||
(Accrued interest on note payable.) | |||
January 20, 2017 | Interest expense | 40 | |
Notes payable- Bank C | 8,000 | ||
Interest payable | 50 | ||
Cash | 8,090 | ||
(Paid note with interest.) |
(Table 2)
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Chapter 9 Solutions
Financial Accounting Fundamentals
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