Question

(3) The company obtained its first loan of $300,000 from a bank on 1 February 20x3. $30,000 would be repaid on every 1 February and 1 August, commencing from 1 February 20x4. The loan carries an interest rate of 6% per annum. Interest was payable semi-annually in arrears on every 1 February and 1 August. The company obtained its second loan of $50,000 on 1 November 20x6 at an interest rate of 7.2% per annum. Both the loan principal and interests would be fully paid on 31 October 20x7. Other than these two borrowings, the company has no other borrowings.

journal entry?

Answer 1

There is no clarification for which period Journal entry to be made and what closing period is being followed. Hence the journal entry for entire period of both bank loan is worked out.

Following is the journal entry for each transaction happening for both Loan (Since the year end period is not informed hence the accrual entry of interest is not provided)

Date	Accounts	Debit	Credit
1-feb-20x3	Cash	300,000.00
	Loan from Bank		300,000.00
	(To record Loan from Bank)
1-Aug-20x3	Interest Expenes	9,000.00
	Cash		9,000.00
	(To record interest @ 6% for 6 Month on Bank Loan)
1-Feb-20x4	Interest Expenes	9,000.00
	Cash		9,000.00
	(To record interest @ 6% for 6 Month on Bank Loan)
1-Feb-20x4	Loan from Bank	30,000.00
	Cash		30,000.00
	(To record 1st Installment repayment bank Loan)
1-Aug-20x4	Interest Expenes	8,100.00
	Cash		8,100.00
	(To record interest @ 6% for 6 Month on Bank Loan)
1-Aug-20x4	Loan from Bank	30,000.00
	Cash		30,000.00
	(To record 2nd Installment repayment bank Loan)
1-Feb-20x5	Interest Expenes	7,200.00
	Cash		7,200.00
	(To record interest @ 6% for 6 Month on Bank Loan)
1-Feb-20x5	Loan from Bank	30,000.00
	Cash		30,000.00
	(To record 3rd Installment repayment bank Loan)
1-Aug-20x5	Interest Expenes	6,300.00
	Cash		6,300.00
	(To record interest @ 6% for 6 Month on Bank Loan)
1-Aug-20x5	Loan from Bank	30,000.00
	Cash		30,000.00
	(To record 4th Installment repayment bank Loan)
1-Feb-20x6	Interest Expenes	5,400.00
	Cash		5,400.00
	(To record interest @ 6% for 6 Month on Bank Loan)
1-Aug-20x6	Loan from Bank	30,000.00
	Cash		30,000.00
	(To record 5th Installment repayment bank Loan)
1-Nov-20x6	Cash	50,000.00
	Loan from Bank-2		50,000.00
	(To record Loan from Bank-2)
1-Feb-20x7	Interest Expenes	4,500.00
	Cash		4,500.00
	(To record interest @ 6% for 6 Month on Bank Loan)
1-Feb-20x7	Loan from Bank	30,000.00
	Cash		30,000.00
	(To record 6th Installment repayment bank Loan)
1-Aug-20x7	Interest Expenes	3,600.00
	Cash		3,600.00
	(To record interest @ 6% for 6 Month on Bank Loan)
1-Aug-20x7	Loan from Bank	30,000.00
	Cash		30,000.00
	(To record 7th Installment repayment bank Loan)
31-oct-20x7	Interest Expenes	900.00
	Cash		900.00
	(To record interest @ 6% for 2 Month on Bank Loan)
31-oct-20x7	Interest Expenes	3,600.00
	Cash		3,600.00
	(To record interest @ 6% for 12 Month on Bank Loan-2)
31-oct-20x7	Loan from Bank	90,000.00
	Cash		90,000.00
	(To record repayment of Bank Loan)
31-oct-20x7	Loan from Bank-2	50,000.00
	Cash		50,000.00
	(To record repayment of Bank Loan-2)