Homework Answers
Solution 1:
Amount of borrowings = $1,840,000*65% = $1,196,000
Interest expense on 31.12.2016 = $1,196,000*11%*6/12 = $65,780
Reduction in notes payable recorded by firm on 31.12.2016 = $294,850 - $65,780 = $229,070
Solution 2:
Value of equipment recorded on July 1 2016 = cash price of machine = $1,600,000
Solution 3:
Amount of borrowings = $1,180,000*65% = $767,000
Interest expense on 31.12.2016 = $767,000*12%*6/12 = $46,020
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Date Account Debit Credit Year 1 July 1 Oct. 1 Dec. 31-Note Dec. 31-Bond Year 2...
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Account
Debit
Credit
Year 1
July 1
Oct. 1
Dec. 31-Note
Dec. 31-Bond
Year 2
June 30
Sept. 30
Dec. 31-Note
Dec. 31-Bond
Year 3
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Sept. 30
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a. Year 1 $
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$
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June 30.
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Credit
Year 1
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Dec. 31-Bond
Year 2
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Sept. 30
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Dec. 31-Bond
Year 3
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