Question

Question 1 (13 marks, 19 minutes) On October 1, 2012, Proctor Ltd. borrowed $80,000 from Prudential Bank by signing a 10 month, 6%, interest-bearing note. Interest and principal are due at maturity. Proctor's year end is March 31. Proctor prepares adjusting entries at year end only. Required: Prepare the journal entries listed below associated with the note payable on the books of Proctor Ltd. (a) Prepare the entry on October 1, 2012 when the note was issued. (1 mark) (b) Prepare any adjusting entries necessary on March 31, 2013 in order to prepare the financial statements. (2 marks) (c) Prepare the entry to record payment of the note by Proctor at maturity date. (4 marks) PARTB 0 Using the above information, prepare the required journal entry on November 30, 2012 in the books of Proctor, if the terms of the loan required monthly blended principal and interest payments of $10,800. (round your answer to the nearest dollar) (4 marks) Using the above information, prepare the required journal entry on Oct the books of Proctor, if the terms of the loan required monthly fixed principal payments of $10,000 plus interest. (2 marks)

Answer 1

	Date	Particulars	Debit	Credit
a	oct 1 2012	Bank A/c Dr.	$80,000
		To, 6% Note payable		$80,000
		(Being Interest bearing Note taken)
b	mar 31 2013	Interest on Note A/c Dr.	$2,400
		To, Interest accrued on 6% Note payable A/c		$2,400
		(80,000*6%*6/12) interest booked
c	july 31 2013	6% Note payable A/c Dr.	$80,000
		Interest accrued on 6% note payable A/c	$2,400
		Interest on Note A/c Dr.	$1,600		(80000*6%*4/12)
		To, Bank		$84,000
		(Interest and Note paid)
							Date	opening principal	interest	Installment	Principal deduction
PART B							31-Oct	80000	400	10800	10400
(i)	30-Nov-12	6% Note payable Ac. Dr.	$10,452				30-Nov	69600	348	10800	10452
		Interest on loan Note	$348
		To, bank		$10,800
		(Being blended payment made)
(ii)	31-Oct-12	6% Note payable Ac. Dr.	$10,000
		Interest on loan Note	$400
		To, bank		$10,400