Question

Perez Company borrowed $54,000 from the First National Bank on June 1, 2019, on a 3-year, 8.7% note. Interest is paid annually on May 31. If required, round amounts to the nearest dollar. Required: 1. Record the borrowing transaction in Perez's journal 2019. June 1 Record issuance of note at par 2. Prepare the adjusting entries made at December 31, 2019 and 2020. 2019. December 31 Record interest expense 2020. December 31 Record interest expense 3. Prepare the necessary journal entry to recognize the first interest pa 2020. May 31 Record interest and payment of d interest would be presented in Perez December 31, 2020 balance sheet 4. Indicate how the note an Dot Com Bulan Sheart Da Current

Answer 1

Credit Requirement 1 Date Account title and explanation 2019, June 1 Cash Note payable Debit 54,000 | 54,000 Credit Requirement 2 Date Account title and explanation 2019, Dec. 31 Interest expense (54,000 x 8.7% x 7/12) Interest payable Debit 2,741 2,741 2,741 2020, Dec. 31 Interest expense (54,000 x 8.7% x 7/12) Interest payable 2,741 | Credit Requirement 3 Date Account title and explanation 2020, May. 1 Interest expense (54,000 X 8.7% x 5/12) 1 Interest payable Cash Debit 1 ,958 2,741 4,698 Requirement 4 Perez Company Balance sheet (Partial) 31-Dec-20 Current liabilities: Interest payable Long-term liabilities: Note payable 2,741 54,000 Requirement 5 Credit Date Account title and explanation 2022, May. 1 Interest expense (54,000 x 8.7% x 5/12) Interest payable Cash Debit 1,958 2,741 4,698 Credit Date Account title and explanation 2022, May. 31 Note payable Cash Debit 54,000 1 54,000