Question

Note Payable and Accrued Interest Labels and Amount Descriptions Instructions General Journal Chart of Accounts Balance Sheet X Instructions Ellsworth Enterprises borrowed $425,000 on an 8 %. interest-bearing note on September 30, 2020. Ellsworth ends its fiscal year on December 31. The note was paid with interest on March 31, 2021 Required: 1. Prepare the entry for this note on September 30, 2020 2. Prepare the adjusting entry for this note on December 31, 2020 3. Indicate how the note and the accrued interest would appear on the balance sheet at December 31, 2020. 4. Prepare the entry to record the repayment of the note on March 31, 2021

Answer 1

SOLUTION : 1,2 & 4
Journal Entries				Impact on Financial Statement
				Balane Sheet			INCOME STATEMENT
Date	ACCT Title and explanation	Debit	Credit	Assets	Liabilities	Equity	Revenue	Expenses	Net income
Sept 30, 2020	Cash	$4,25,000		Increase	0	0	0	0	0
	Note Payable		$4,25,000	0	Increases	0	0	0	0
December 31, 2020	Interest Expenses ($ 425,000 X 8% X 3 / 12 Month)	$8,500		0	0	Decrease	0	Increase	Decrease
	Interest Payable		$8,500	0	Increase	0	0	0	0
	Interest Payable	$8,500		0	Decrease	0	0	0	0
March 31, 2020	Interest Expenses ($ 425,000 X 8% X 3 / 12 Month)	$8,500		0	0	Decrease	0	Increase	Decrease
	Note Payable	$4,25,000		0	Decrease	0	0	0	0
	Cash		$4,42,000	Decrease	0	0	0	0	0
SOLUTION : 3)
	BALANCE SHEET
	Liabilites (Partial )
	Current Liabilities
	Note Payable	$4,25,000
	Interest on note Payable	$8,500
	Total	$4,33,500