Chapter 9, Problem 1GLP

1.

Summary Introduction

Introduction: Journal entries refers to initial entries done for any business transaction. Journal entries are done with help of using source document. In journal entries for every debit there is corresponding credit.

To prepare: Journal entries for of all transactions for year 2017 and 2018.

Explanation of Solution

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	Journal entries
Date	Particular	Amount($)	Amount($)
24 Apr 2017	Inventory a/c	40,250
	Notes payable to L a/c		40,250
	(To record inventory purchased on credit )

• Inventory is an asset and it is increased by $40,250, therefore it is debited.
• Notes payable increases the liability by 40,250, therefore it is credited.

	Journal entries
Date	Particular	Amount($)	Amount($)
19 May2017	L a/c	40,250
	Cash a/c		5,250
	Notes payable a/c		35,000
	(To record cash payment to L and notes issued )

• Cash paid to L reduces the cash and cash equivalent therefore it is credited.
• Notes payable increases the liability therefore it is credited.

	Journal entries
Date	Particular	Amount($)	Amount($)
8 June 2017	Cash a/c	80,000
	Notes payable to N bank a/c		80,000
	(To record notes payable to N bank )

• Cash is borrowed by issuing notes payable due to which cash increases therefore cash Particular is debited.
• Notes payable to N bank increases the liability therefore it is credited.

	Journal entries
Date	Particular	Amount($)	Amount($)
19 Aug 2017	Notes payable to L a/c	35,000
	Interest expense a/c	875
	Cash a/c		35,875
	(To record interest and notes amount paid to L )

• Notes payable issued are paid which is an expenses therefore it is debited.
• Payment of notes payable reduces cash balance therefore it is credited.
• Interest expenses are paid therefore it is debited.

	Journal entries
Date	Particular	Amount($)	Amount($)
19 Aug 2017	Notes payable to N bank a/c	80,000
	Interest expense a/c	2,400
	Cash a/c		82,400
	(To record interest and notes amount paid to N bank )

• Notes payable to N bank is an expense therefore it is debited.
• Interest expense is a liability which is paid in cash therefore it is debited.
• Cash account balance is reduced due to payment of liability therefore it is credited.

	Journal entries
Date	Particular	Amount($)	Amount($)
28 Nov 2017	Cash a/c	42,000
	Notes payable to F bank a/c		42,000
	(To record notes payable from bank F )
	Journal entries
Date	Particular	Amount($)	Amount($)
31 Dec 2017	Interest expense a/c	308
	Interest payable a/c		308
	(To record accrued interest )

• Cash account increases because of issuing of notes payable therefore it is debited.
• Notes payable to F bank increases the liability therefore it is credited.
• Interest expense is the debited because all expenses and losses are always debited.
• Interest payable is credited because it increases the liability of the company.

	Journal entries
Date	Particular	Amount($)	Amount($)
28 Jan 2018	Notes payable to F bank a/c	42,000
	Interest payable a/c	308
	Interest expense a/c	252
	Cash a/c		42,560
	(To record amount paid to F bank for notes on maturity date. )

• Notes payable to F bank reduces the liability therefore it is debited.
• Interest payable paid reduces the liability therefore it is debited.
• Expenses paid are always debited because it reduces the liability therefore interest expenses are debited.
• Cash account is credited because payment of liability reduces cash balance.