BE13-3 (LO1) Takemoto Corporation borrowed $60,000 on November 1, 2017, by signing a $61,350, 3-month, zero-interest- bearing note. Prepare Takemoto's November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry.
BE13-4 (LO1) Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2017, for $18 each. Prepare Sport Pro's August 1, 2017, journal entry and the December 31, 2017, annual adjusting entry, assuming the magazines are published and
BE13-3:
Answer:
Date | Account title and explanation | Debit | Credit |
Nov.1,2017 | Cash | $60,000 | |
Discount on notes payable | $1,350 | ||
Notes payable | $61,350 | ||
[To record cash borrowed in exchange of zero-interest note] | |||
Dec 31,2017 | Interest expense | $900 | |
Discount on notes payable | $900 | ||
[To record accrued interest expense] | |||
Feb 1,2018 | Notes payable | $61,350 | |
Interest expense | $450 | ||
Discount on notes payable | $450 | ||
Cash | $61,350 | ||
[To record payment for notes payable] |
Calculations:
Face value of the note | $61,350 |
(Less): Cash received | ($60,000) |
Total Interest expense for 3 months | $1,350 |
Adjusting entry for 2 months interest (Nov.1 to Dec.31). So, Accrued interest on Dec 31 = 1,350 x 2/3 = $900.
Takemoto Corporation borrowed $60,000 on November 1, 2017, by signing a $61,350
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