(a) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Journal entry for money borrowed.

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 9, Problem 92PSB

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSB

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSB

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st January.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $200,000 × 8.6%

Interest Expense (annual) = $17,200

Since, the interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 1112

Interest Expense (for 6 months) = $17,200 × 1112

Interest Expense (for 6 months) = $15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st January 2020.

Expert Solution

Answer to Problem 92PSB

Journal Entry for Interest Payment on 31^st January 2020

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2020 until 31^st January 2020 as well as payment for interest payable for previous 11 months i.e. 1^st February 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Interest Expense for previous 11 months was transferred to interest payable whereas for next 1 month was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSB

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSB

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	200,000 15,767 1,433	217,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2022 until 31^st January 2022 as well as payment for interest payable for previous 11 months i.e. 1^st February 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Interest Expense Dr. Interest Payable Dr. Cash	15,767 1,433	17,200

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st January 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Cash	200,000	200,000

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 9, Problem 92PSB

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSB

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSB

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st January.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $200,000 × 8.6%

Interest Expense (annual) = $17,200

Since, the interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 1112

Interest Expense (for 6 months) = $17,200 × 1112

Interest Expense (for 6 months) = $15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st January 2020.

Expert Solution

Answer to Problem 92PSB

Journal Entry for Interest Payment on 31^st January 2020

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2020 until 31^st January 2020 as well as payment for interest payable for previous 11 months i.e. 1^st February 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Interest Expense for previous 11 months was transferred to interest payable whereas for next 1 month was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSB

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSB

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	200,000 15,767 1,433	217,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2022 until 31^st January 2022 as well as payment for interest payable for previous 11 months i.e. 1^st February 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Interest Expense Dr. Interest Payable Dr. Cash	15,767 1,433	17,200

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st January 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Cash	200,000	200,000

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 9, Problem 92PSB

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSB

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSB

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st January.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $200,000 × 8.6%

Interest Expense (annual) = $17,200

Since, the interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 1112

Interest Expense (for 6 months) = $17,200 × 1112

Interest Expense (for 6 months) = $15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st January 2020.

Expert Solution

Answer to Problem 92PSB

Journal Entry for Interest Payment on 31^st January 2020

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2020 until 31^st January 2020 as well as payment for interest payable for previous 11 months i.e. 1^st February 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Interest Expense for previous 11 months was transferred to interest payable whereas for next 1 month was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSB

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSB

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	200,000 15,767 1,433	217,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2022 until 31^st January 2022 as well as payment for interest payable for previous 11 months i.e. 1^st February 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Interest Expense Dr. Interest Payable Dr. Cash	15,767 1,433	17,200

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st January 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Cash	200,000	200,000

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 9, Problem 92PSB

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSB

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSB

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st January.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $200,000 × 8.6%

Interest Expense (annual) = $17,200

Since, the interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 1112

Interest Expense (for 6 months) = $17,200 × 1112

Interest Expense (for 6 months) = $15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st January 2020.

Expert Solution

Answer to Problem 92PSB

Journal Entry for Interest Payment on 31^st January 2020

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2020 until 31^st January 2020 as well as payment for interest payable for previous 11 months i.e. 1^st February 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Interest Expense for previous 11 months was transferred to interest payable whereas for next 1 month was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSB

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSB

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	200,000 15,767 1,433	217,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2022 until 31^st January 2022 as well as payment for interest payable for previous 11 months i.e. 1^st February 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Interest Expense Dr. Interest Payable Dr. Cash	15,767 1,433	17,200

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st January 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Cash	200,000	200,000

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Answer 5

Chapter 9, Problem 92PSB

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSB

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSB

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st January.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $200,000 × 8.6%

Interest Expense (annual) = $17,200

Since, the interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 1112

Interest Expense (for 6 months) = $17,200 × 1112

Interest Expense (for 6 months) = $15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st January 2020.

Expert Solution

Answer to Problem 92PSB

Journal Entry for Interest Payment on 31^st January 2020

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2020 until 31^st January 2020 as well as payment for interest payable for previous 11 months i.e. 1^st February 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Interest Expense for previous 11 months was transferred to interest payable whereas for next 1 month was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSB

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSB

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	200,000 15,767 1,433	217,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2022 until 31^st January 2022 as well as payment for interest payable for previous 11 months i.e. 1^st February 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Interest Expense Dr. Interest Payable Dr. Cash	15,767 1,433	17,200

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st January 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Cash	200,000	200,000

Answer 6

Chapter 9, Problem 92PSB

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSB

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

Answer 7

Chapter 9, Problem 92PSB

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Answer 8

Expert Solution

Answer to Problem 92PSB

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st February 2019	Cash Dr. Notes Payable	200,000	200,000

Answer 13

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSB

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st January.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $200,000 × 8.6%

Interest Expense (annual) = $17,200

Since, the interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 1112

Interest Expense (for 6 months) = $17,200 × 1112

Interest Expense (for 6 months) = $15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Answer 14

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Answer 15

Expert Solution

Answer to Problem 92PSB

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st January.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $200,000 × 8.6%

Interest Expense (annual) = $17,200

Since, the interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 1112

Interest Expense (for 6 months) = $17,200 × 1112

Interest Expense (for 6 months) = $15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Answer 20

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st January 2020.

Expert Solution

Answer to Problem 92PSB

Journal Entry for Interest Payment on 31^st January 2020

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2020 until 31^st January 2020 as well as payment for interest payable for previous 11 months i.e. 1^st February 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Interest Expense for previous 11 months was transferred to interest payable whereas for next 1 month was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

Answer 21

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st January 2020.

Answer 22

Expert Solution

Answer to Problem 92PSB

Journal Entry for Interest Payment on 31^st January 2020

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2020 until 31^st January 2020 as well as payment for interest payable for previous 11 months i.e. 1^st February 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2020	Interest Expense Dr. Interest Payable Dr. Cash	1,433 15,767	17,200

Interest Expense for previous 11 months was transferred to interest payable whereas for next 1 month was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

Answer 27

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSB

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

Answer 28

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Answer 29

Expert Solution

Answer to Problem 92PSB

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	15,767	15,767

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	15,767	15,767
Bonds Payable Total Long term Liability	200,000	200,000
Total Liability	-	215,767

Answer 34

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSB

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	200,000 15,767 1,433	217,200

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2022 until 31^st January 2022 as well as payment for interest payable for previous 11 months i.e. 1^st February 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Interest Expense Dr. Interest Payable Dr. Cash	15,767 1,433	17,200

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st January 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Cash	200,000	200,000

Answer 35

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Answer 36

Expert Solution

Answer to Problem 92PSB

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	200,000 15,767 1,433	217,200

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

Given:

Borrowed $200,000 for 3years 8.6% note on 1^st Feb 2019 (interest paid annually on 31^st January).

The interest is to be paid annually on 31^st January so an adjusting entry will be posted as interest payable for 11 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	15,767	15,767

Hence, an adjusting entry for 11 months interest payable of $15,767 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 1 month i.e. from 1^st January 2022 until 31^st January 2022 as well as payment for interest payable for previous 11 months i.e. 1^st February 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Interest Expense Dr. Interest Payable Dr. Cash	15,767 1,433	17,200

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st January 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st January 2022	Notes Payable Dr. Cash	200,000	200,000

Answer 41

Ch. 9 - Prob. 1DQ Ch. 9 - What is the difference between a bond and a note?...Ch. 9 - What does the face (or Par) value of a bond...Ch. 9 - Prob. 4DQ Ch. 9 - What is the stated or coupon rate of a bond?Ch. 9 - Prob. 6DQ Ch. 9 - How does a secured bond differ from an unsecured...Ch. 9 - Prob. 8DQ Ch. 9 - Prob. 9DQ Ch. 9 - Prob. 10DQ

(a) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Journal entry for money borrowed.

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(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Answer to Problem 92PSB

Explanation of Solution

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Answer to Problem 92PSB

Explanation of Solution

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st January 2020.

Answer to Problem 92PSB

Explanation of Solution

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Answer to Problem 92PSB

Explanation of Solution

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Answer to Problem 92PSB

Explanation of Solution

Want to see more full solutions like this?

Chapter 9 Solutions

(a) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Journal entry for money borrowed.

Videos

(a) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Journal entry for money borrowed.

Answer to Problem 92PSB

Explanation of Solution

(b) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Adjusting Journal entry on 31st December 2019 and 2020.

Answer to Problem 92PSB

Explanation of Solution

(c) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Interest payment on 31st January 2020.

Answer to Problem 92PSB

Explanation of Solution

(d) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To show: Liability on balance sheet for year ending on 31st December 2020.

Answer to Problem 92PSB

Explanation of Solution

(e) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Repayment of note and interest for last year.

Answer to Problem 92PSB

Explanation of Solution

Want to see more full solutions like this?

Chapter 9 Solutions

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st January 2020.

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.