Question

Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Hudson's Bay Company (HBC) is Canada's largest department store. Each Christmas, HBC builds up its inventory to meet the needs of Christmas shoppers. A large portion of Christmas sales are on credit. As a result, HBC often collects cash from the sales several months after Christmas. Assume that on November 1, 2017, HBC borrowed $7.5 million cash from Downtown Bank and signed a promissory note that matures in six months. The interest rate was 6.0 percent payable at maturity. The accounting period ends December 31. Required: 1. Prepare the journal entry to record the note on November 1, 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet Record the journal entry to record the note on November 1, 2017. Note: Enter debits before credits. General Journal Genera Debit Credit Date November 01, 2017

Answer 1

Answer:

Date	Account and Explanation	Debit ($)	Credit ($)
Nov 1,2017	Cash	7,500,000
	Notes payable		7,500,000
	(To record amount borrow)
Dec 31,2017	Interest expense (7500000*6.0%*2/12)	75,000
	Interest payable		75,000
	(To record accured interest)
Apr 30,2018	Notes payable	7,500,000
	Interest payable	75,000
	Interest expense (7,500,000*6.0%*4/12)	150,000
	Cash		7,725,000
	(To record amount paid)