Question

Exercise 2 On March 1, 2018, Machinarium SpA borrowed €500,000 from Unidebit bank. The five-year, 7% loan requires payments in semi-annual installments. Each payment consists of 25,000 principal, plus one semester's interest. On July 31, Machinarium sends an invoice of 18,000 to a customer for services provided. The customer pays with an 18-month note, bearing interest at 8%. On November 15, the firm discounts its note receivable to the Banca di Roccasecca, that applies an 11% discount rate to the transaction. Required: Journalize the above described transactions, including the adjusting entries at the end of 2018, and the payments/receipts in 2019

Answer 1

Journal Entry

1. Bank A/c Dr 500,000

To Unidebit Bank loan A/c 500,000

2. Interest on loan A/c Dr 2916.67

To Interest Payable A/c    2916.67

3. Profit and loss A/c Dr 2916.67

To Interest on loan A/c 2916.67

In 2019

1. Machinarium A/c Dr 18,000

To Income A/c 18,000

2. Bill receivable A/c Dr 20,160

To Interest A/c 2160

To Machinarium A/c 18,000

4. Interest on Loan A/c Dr 14583.33

Interest payable A/c Dr 2916.67

Unidebit Bank Loan A/c Dr 25,000  

To Bank A/c 42,500

5. Bank A/c Dr 17480.4

Discount A/c Dr 2679.6

To Bill Receivable A/c 20160

6. Interest on loan A/c Dr 17500

Unidebit Bank Loan A/c Dr 25,000

To Bank A/c 42500

7. Profit and loss A/c Dr 32083.33

To Interest on loan A/c 32083.33