Question

STIOV #5 8 Long Term Note Equipment on July 1 Note Payable in the amount of $800,000 was signed when Extra Const al 19. 2016. The entire note will be repaid in 3 years, but Interest will be issuance of the Long Term Note and the issue ad the Adjusting Entry on December 31st, 2016 for 6 months interest. If the Long Term Note Payable was to be repaid in 5 years, as stated above, in what section of the balance sheet would the Note Payable be shown and for what amount on December 31, 2016. the Long Term Note Pavable was to be repaid in 5 equal installments, in what section(s) of the balance sheet would the Note navahle he shown and for what S amounts. (HINT: Amounts amount due within one year are current liabilities and due past one year are long term liabilities).

Answer 1

i. To record issuance of long-term note:

Date	Account title and explanation	Debit	Credit
July 1,2016	Equipment	$800,000
	Notes payable		$800,000
	[To record issuance of long-term notes in exchange of equipment]

ii. To record adjusting entry for interest on Dec 31,2016:

Date	Account title and explanation	Debit	Credit
Dec 31,2016	Interest expense [800,000 x 8% x (6/12)]	$32,000
	Interest payable		$32,000
	[To record accrued interest expense]

iii. If long-term note is payable in 5 years:

Balance Sheet (Partial)
As of December 31,2016
Liabilities
Long-term Debt:
Notes payable	$800,000

iv. If long-term note is payable in 5 equal installments:

Balance Sheet (Partial)
As of December 31,2016
Liabilities
Current-liabilities:
Notes payable (800,000/5)	$160,000
Long-term Debt:
Notes payable (800,000-160,000)	$640,000