Question

On November 1, Bahama Cruise Lines borrows $3 million and issues a six-month, 6% note payable. Interest is payable at maturity.
   

Record the issuance of the note and the appropriate adjustment for interest expense at December 31, the end of the reporting period. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5 should be entered as 5,000,000).) For this assignment you must list in a general journal with debit and credit listed. one journal for each month (one November one December).

Part two:

On November 1, Bahama National Bank lends $3.9 million and accepts a six-month, 9% note receivable. Interest is due at maturity.

Record the acceptance of the note and the appropriate adjustment for interest revenue at December 31, the end of the reporting period. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5 should be entered as 5,000,000).) Two Journals are required. One for November and one for December.

Answer 1

Requirement 1:[Notes payable]

Date	Account title and Explanation	Debit	Credit
Nov.1	Cash	$3,000,000
	Notes payable		$3,000,000
	[To record cash borrowed in exchange of note]
Dec.31	Interest expense [$3,000,000 x 6% x 2/12]	$30,000
	Interest payable		$30,000
	[To record accrued interest]

Requirement 2:[Notes receivable]

Date	Account title and Explanation	Debit	Credit
Nov. 1	Notes receivable	$3,900,000
	Cash		$3,900,000
	[To record cash lending in exchange of note]
Dec.31	Interest receivable	$58,500
	Interest revenue [$3,900,000 x 9% x 2/12]		$58,500
	[To record accrued interest revenue]

*Interest calculated for 2 months [Nov. & Dec.]