Question

The Gaynor Company had the following transactions involving notes payable during 2019. 7 Jan. 15 Purchased office equipment from Corporate Outfitters and issued a 180- day, 10 percent note for $21,000. Apr. 10 Borrowed $14,000 at 12 percent from the Guarantee Bank by discounting a 60-day note payable. June 9 Paid the note due Guarantee Bank. July 14 Paid the note due Corporate Outfitters. Prepare the entries in general journal form to record these transactions. (Assume 360 days in a year. Do not round intermediate calculations.) View transaction list Journal entry worksheet 1 2 3 Purchased office equipment from Corporate Outfitters and issued a 180-day, 10-percent note for $21,000. Note: Enter debits before credits General Journal Debit Credit Date Jan 15, 2010 Record entry Clear entry View general journal

Answer 1

Note payable is a liabilities item which also involves the payment of interest at the time of discharge of the liabilities, here the purchase and the actual borrowing interest will be as follows

Interest on note on purchase of equipment = Note payable amount × Rate × Days /360.

Interest on note on purchase of equipment = $ 21,000 × 10% × 180 /360 = $ 1,050.

Interest on Borrowing from Guarantee bank ,= $ 14,000 × 12% × 60/360 = $ 280.

The journal entry will be as follows :

1.

Date	General journal	Debit	Credit
Jan, 15, 2019	Office Equipment	21000
	10% Notes payable		21,000
	( Being Equipment purchasd issuing note payable)

2.

Date	General Journal	Debit	Credit
April 10,2019	Cash	14,000
	12% Note payable		14,000
	( Being amount borrowed)

3.

Date	general journal	Debit	Credit
June 9,2019	12% Note payable	14,000
	Interest Expenses	280
	Cash		14,280
	( Being note paid)

4.

Date	General Journal	Debit	credit
Jul, 14,2019	10% Note payable	21,000
	Interest Expense	1,050
	Cash		22,050
	( Being note paid)

Feel free to comment doubts if any..