Question

Kelly Jones and Tami Crawford borrowed $26,000 on a 7-month, 6% note from Gem State Bank to open their business, JC's Coffee House. The money was borrowed on June 1, 2017, and the ne matures January 1, 2018. Prepare the entry to record the receipt of the funds from the loan. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation 26000 June 1 Notes Payable 910 Interest Payable eTextbook and Media List of Accounts tities are automatically indented when amount is entered. Do not indent

Answer 1

SOLUTION

S.No.	Date	Accounts titles and Explanation	Debit ($)	Credit ($)
a.	June 1	Cash	26,000
		Notes payable		26,000
		(To record the receipt of funds from the loan)
b.	June 30	Interest expense	130
		Interest payable (26,000*6%*1/12)		130
		(To record the interest accrued)
d.	Jan.1, 2018	Notes Payable	26,000
		Interest Payable	910
		Cash		26,910
		(To record payment of loan back)

c. Balance in the Interest Payable account at December 31, 2017

= Interest expense * Number of months

= 130 * 7 = 910