Question

On November 16, 2019, Clear Glass Company borrowed $14,000 from First American Bank by issuing a 90-day, non-interest-bearing note. The bank discounted this note at 10% and remitted the difference to Clear Glass. Required: 1. Prepare the journal entries of Clear Glass to record the preceding information, the related calendar year-end adjusting entry, and payment of the note at maturity. 2. Show how the preceding items would be reported on the December 31, 2019, balance sheet. 3. Next Level What is Clear Glass Company's effective interest rate?

Answer 1

credet 2019 C$ 14000 x 10 x 90/36 > HOCO Journal entries of clear Glass Company Date Accounting fittes & cuplaration / Debit Novi6, Cash Al or 13650 Discount on note payable Alcoo 350 TO Notes payable nic DEC31) Intedest Expense AC OD 175 2019 (2 o Discount on soles payableac Febis Notes payable al oo 14,000 2020 To cash Al febis Interest Expense ALCOO 195 2020 .70 Discount on Notes payableme 173 14,000 175 2. CLEAR GLASS company protial Balance sheel December 3, 2019 Cudvent lPabalories : Notes payable $ 14,000 Discount on notes 175 $ 13,825 payable 3. Effective Interest rate Intereot Rate= 350 x 360 x 100 = 0.026X 4X100 = 10-HO 13630