Question

During 2021, Carla Vista Co, borrowed cash from Wildhorse Co. by issuing notes payable as follows. 1. July 1, 2021, issued an eight-month.5% note for $71.400. Interest and principal are payable at maturity. 2. November 1, 2021, issued a three-month, 5% note for $52.800 Interest is payable monthly on the first day of the month Principal is payable at maturity Carla Vista has a December 31 fiscal year end and prepares adjusting entries on an annual basis. Prepare all necessary journal entries for Carla Vista Co. to record the notes. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to the nearest whole dollar, eg. 5,275. If no entry is required, select "No Entry for the account titles and enter for the amounts Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit

Answer 1

Prepare journal entries to record note payable:

Credit Date Account Titles July 01, 2021 Cash Note payable Debit $71,400 $71,400 S52.800 Nov. 01. 2021 Cash Note payable $52.800

Credit Date Account Titles Dec. 31, 2021 Interest Expense Interest payable ($71400 x 5% x 6/12) Debit $1,785 $1,785 $440 Dec 31, 2021 Interest Expense Interest payable ($52,800 x 5% x 2/12) $440 Feb 01, 2022 Interest Expense (S52.800 < 5% < 1/12) Interest payable Note payable Cash $220 $440 $52,800 $53,460 Mar. 01, 2022 Interest Expense ($71,400 x 5% x 2/12) Interest payable Note payable Cash $595 $1,785 $71.400 $73.780