Question

On August 1, 2019, The Villas at Mill Lake, Inc., purchased inventory costing $56,000 by signing a 9%, six-month, short-term note payable. The company will pay the entire note (principal and interest) on the note's maturity date. Read the requirements. Requirement 1. Journalize the company's purchase of inventory. (Record debits first, then credits. Exclude explanations from journal entries.) Journal Entry Accounts Date Debit Credit 2019 Aug 1 i Requirements Journalize the company's purchase of inventory. Make the adjusting entry for accrual of interest on the note payable on December 31, 2019. At December 31, 2019, what is reported on the balance sheet related to this note payable? Record the payment of the note payable (principal and interest) on its maturity date. Requirement 2. Make the adjusting entry for accrual of interest on the note payable on December 31, 2019. (Record debits first, then credits. Exclu 3. Journal Entry Accounts 4. Debit Credit Date 2019 Dec 31 Print Done Requirement 3. At December 31, 2019, what is reported on the balance sheet related to this note payable? (If a box is not used in the table, leave the box empty; do not select a label or enter a zero.) Balance Sheet (partial) on December 31, 2019 Account Amount Choose from any list or enter any number in the input fields and then continue to the next question.

Answer 1

Solution:

Requirement 1:

Date	Accounts	Debit	Credit
Aug. 1	Inventory	$        56,000
2019	Notes Payable(Short Term)		$          56,000
	[ Being inventory purchased on notes]

Requirement 2:

Date	Accounts	Debit	Credit
Dec. 31	Interest Expense (56000*9%*5/12)	$          2,100
2019	Accrued Interest Payable		$            2,100
	(Being accrued interest payable)

Requirement 3:

Balance Sheet (Partial) on December 31,2019
Accounts	Amount
Current Liabilities
Notes Payable	$                         56,000
Add: Accrued Interest Payable	$                            2,100

Requirement 4:

Date	Accounts	Debit	Credit
Feb. 1	Notes Payable(Short Term)	$        56,000
2020	Interest Expense (56000*9%*1/12)	$              420
	Accrued Interest Payable (56000*9%*5/12)	$          2,100
	Cash		$          58,520
	(Being notes paid along with interest)

Notes:

1) On Feb. 1, Notes are paid along with interest 56000+(56000*9%*6/12) = $ 58,520.

2) Notes payable is shown under current liabilities in balance sheet because it was short term notes of 6 months