Question

Give the generaljournal entry to record each of the following transactions for Davidson Company: 1. Issued a 6-month, 10 percent note for $74,000 to purchase two forklifts on May 14, 2019 (debit Warehouse Equipment). 2. Discounted its own 180-day, noninterest-bearing note with a principal amount of $28,000 at the Nelson Bank and Trust on May 28, 2019. The bank charged a discount rate of 8 percent. 3. Paid the May 14 note on its due date. 4. Paid the note discounted on May 28 on its due date. Analyze: What is the total interest expense for the year as a result of these transactions?

Answer 1

JOURNAL
DATE	GENERAL JOURNAL	DEBIT	CREDIT
14 May	Warehouse Equipment           Short term note payable To record 10% note payable in 6 months.	$74,000	$74,000
28 May	Cash Discount expense          Short term note receivable To record the discounting of bill	$25,760 $2,240	$28,000
14 May	Interest Expense      Short Term Payable    To record interest expense Short term note payable        Cash    To record payment of note	$7,400 $81,400	$7400 $81,400
May 28	Short term note receivable        Cash To record the payment of discounted bill	$28,000	$28,000