(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.

Question

Want to see more full solutions like this?

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 94PSB

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 94PSB

Journal Entry for issuance of Notes at discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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 discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

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 30^th June 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750+ $725

Interest Expense = $44,475.

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:

Adjusting Journal entry on 31^st December 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 31^stDecember 2020

Date	Particulars	Debit ($)	Credit ($)
31^stDecember 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750 + $725

Interest Expense = $44,475.

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 evaluate:

Carrying amount of these Notes on 31^st December 2024.

Expert Solution

Answer to Problem 94PSB

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Discount Amortization = $725

Discount on Amortization for 10 periods (i.e. 5 years) = $725×10

Discount on Amortization for 10 periods (i.e. 5 years) = $7,250

This will increase “Discount on Notes payable” in the balance sheet.

So, Discount on Notes payable (until 31^st December 2023) = $725×8

Discount on Notes payable (until 31^st December 2023) = $5,800

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Please record the following journal entries: A) Record issuance of a notes payable B) record first monthly payment C) Record Second Monthly payment

Which journal entry below would be properly used to record an issuance of an installment note (borrowing money) from First Bank on January 1 of this year. The principal of the note is $50,000, interest rate is 7%, terms of the note 5 years, annual payment $12,195. JOURNAL Page 25 DATE DESCRIPTION P.REF. DEBIT CREDIT Jan. 1 (1) (2) Notes Payable debit $50,000, Cash credit $50,000 Cash debit $12,195, Notes Payable credit $12,195 Cash debit $50,000, Notes Payable credit $50,000 Cash debit $12,195, Bonds Payable credit $12,195

Recording Entries for Note Payable Lacey Corp. issued a three-year, $17,500 note with an 8% stated rate to Hayley Co. on January 1, 2020, and received cash of $17,500. The note requires semiannual interest payments on June 30 and December 31. Provide journal entries to be made at each of the following dates. a. January 1, 2020, for issuance of the note. b. June 30, 2020, for the interest payment. Date Account Name Dr. Cr. a. Jan. 1, 2020 Answer Answer Answer Answer Answer Answer b. June 30, 2020 Answer Answer Answer Answer Answer Answer

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 94PSB

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 94PSB

Journal Entry for issuance of Notes at discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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 discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

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 30^th June 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750+ $725

Interest Expense = $44,475.

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:

Adjusting Journal entry on 31^st December 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 31^stDecember 2020

Date	Particulars	Debit ($)	Credit ($)
31^stDecember 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750 + $725

Interest Expense = $44,475.

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 evaluate:

Carrying amount of these Notes on 31^st December 2024.

Expert Solution

Answer to Problem 94PSB

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Discount Amortization = $725

Discount on Amortization for 10 periods (i.e. 5 years) = $725×10

Discount on Amortization for 10 periods (i.e. 5 years) = $7,250

This will increase “Discount on Notes payable” in the balance sheet.

So, Discount on Notes payable (until 31^st December 2023) = $725×8

Discount on Notes payable (until 31^st December 2023) = $5,800

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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 94PSB

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 94PSB

Journal Entry for issuance of Notes at discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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 discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

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 30^th June 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750+ $725

Interest Expense = $44,475.

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:

Adjusting Journal entry on 31^st December 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 31^stDecember 2020

Date	Particulars	Debit ($)	Credit ($)
31^stDecember 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750 + $725

Interest Expense = $44,475.

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 evaluate:

Carrying amount of these Notes on 31^st December 2024.

Expert Solution

Answer to Problem 94PSB

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Discount Amortization = $725

Discount on Amortization for 10 periods (i.e. 5 years) = $725×10

Discount on Amortization for 10 periods (i.e. 5 years) = $7,250

This will increase “Discount on Notes payable” in the balance sheet.

So, Discount on Notes payable (until 31^st December 2023) = $725×8

Discount on Notes payable (until 31^st December 2023) = $5,800

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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 94PSB

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 94PSB

Journal Entry for issuance of Notes at discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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 discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

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 30^th June 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750+ $725

Interest Expense = $44,475.

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:

Adjusting Journal entry on 31^st December 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 31^stDecember 2020

Date	Particulars	Debit ($)	Credit ($)
31^stDecember 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750 + $725

Interest Expense = $44,475.

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 evaluate:

Carrying amount of these Notes on 31^st December 2024.

Expert Solution

Answer to Problem 94PSB

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Discount Amortization = $725

Discount on Amortization for 10 periods (i.e. 5 years) = $725×10

Discount on Amortization for 10 periods (i.e. 5 years) = $7,250

This will increase “Discount on Notes payable” in the balance sheet.

So, Discount on Notes payable (until 31^st December 2023) = $725×8

Discount on Notes payable (until 31^st December 2023) = $5,800

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 9, Problem 94PSB

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 94PSB

Journal Entry for issuance of Notes at discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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 discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

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 30^th June 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750+ $725

Interest Expense = $44,475.

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:

Adjusting Journal entry on 31^st December 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 31^stDecember 2020

Date	Particulars	Debit ($)	Credit ($)
31^stDecember 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750 + $725

Interest Expense = $44,475.

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 evaluate:

Carrying amount of these Notes on 31^st December 2024.

Expert Solution

Answer to Problem 94PSB

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Discount Amortization = $725

Discount on Amortization for 10 periods (i.e. 5 years) = $725×10

Discount on Amortization for 10 periods (i.e. 5 years) = $7,250

This will increase “Discount on Notes payable” in the balance sheet.

So, Discount on Notes payable (until 31^st December 2023) = $725×8

Discount on Notes payable (until 31^st December 2023) = $5,800

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Answer 6

Chapter 9, Problem 94PSB

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 94PSB

Journal Entry for issuance of Notes at discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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 discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

Answer 7

Chapter 9, Problem 94PSB

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 94PSB

Journal Entry for issuance of Notes at discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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 discount

Date	Particulars	Debit ($)	Credit ($)
1^st January 2020	Cash Dr. Discount on Notes Payable Dr. Notes Payable	985,500 14,500	1,000,000

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 30^th June 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750+ $725

Interest Expense = $44,475.

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 30^th June 2020.

Answer 15

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 30^th June 2020

Date	Particulars	Debit ($)	Credit ($)
30^th June 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750+ $725

Interest Expense = $44,475.

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:

Adjusting Journal entry on 31^st December 2020.

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 31^stDecember 2020

Date	Particulars	Debit ($)	Credit ($)
31^stDecember 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750 + $725

Interest Expense = $44,475.

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:

Adjusting Journal entry on 31^st December 2020.

Answer 22

Expert Solution

Answer to Problem 94PSB

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Adjusting Journal Entry on 31^stDecember 2020

Date	Particulars	Debit ($)	Credit ($)
31^stDecember 2020	Interest Expense Dr. Cash Discount on Notes Payable	44,475	43,750 725

Interest Payment (semi-annual) = Face value × Stated rate × 612

Interest Payment (semi-annual) = $1,000,000 × 8.75% × 612

Interest Payment (semi-annual) = $43,750

Discount Amortization = $14,50020

Discount Amortization = $725

Interest Expense = Interest Payment (semi-annual) + Discount Amortization

Interest Expense = $43,750 + $725

Interest Expense = $44,475.

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 evaluate:

Carrying amount of these Notes on 31^st December 2024.

Expert Solution

Answer to Problem 94PSB

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Discount Amortization = $725

Discount on Amortization for 10 periods (i.e. 5 years) = $725×10

Discount on Amortization for 10 periods (i.e. 5 years) = $7,250

This will increase “Discount on Notes payable” in the balance sheet.

So, Discount on Notes payable (until 31^st December 2023) = $725×8

Discount on Notes payable (until 31^st December 2023) = $5,800

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

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 evaluate:

Carrying amount of these Notes on 31^st December 2024.

Answer 29

Expert Solution

Answer to Problem 94PSB

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Given:

Issued note of $1,000,000 for 10years 8.75% note on 1^st January 2020 for $985,500 (interest paid semi-annually on June 30 and December 31).

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

As per the question, the principal and interest are payable semi-annually on 30^th June and 31^st December.

Discount Amortization = $725

Discount on Amortization for 10 periods (i.e. 5 years) = $725×10

Discount on Amortization for 10 periods (i.e. 5 years) = $7,250

This will increase “Discount on Notes payable” in the balance sheet.

So, Discount on Notes payable (until 31^st December 2023) = $725×8

Discount on Notes payable (until 31^st December 2023) = $5,800

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

Liability	Sub-total ($)	Total ($)
Discount on Notes payable (until 31^st December 2023) (+) Discount on Notes payable for year 2024 Total Discount on Notes payable	5,800 1,450	7,250
Notes Payable Total Long term Liability	985,500	985,500
Total Liability	-	992,750

Answer 34

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.

Concept explainers

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 94PSB

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 30^th June 2020.

Answer to Problem 94PSB

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:

Adjusting Journal entry on 31^st December 2020.

Answer to Problem 94PSB

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 evaluate:

Carrying amount of these Notes on 31^st December 2024.

Answer to Problem 94PSB

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.

Concept explainers

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 94PSB

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 30th June 2020.

Answer to Problem 94PSB

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: Adjusting Journal entry on 31st December 2020.

Answer to Problem 94PSB

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 evaluate: Carrying amount of these Notes on 31st December 2024.

Answer to Problem 94PSB

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 30^th June 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:

Adjusting Journal entry on 31^st December 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 evaluate:

Carrying amount of these Notes on 31^st December 2024.