Question

Delta borrowed $1,400 in the form of a 6-month, zero-interest-bearing note on October 1, 2020 and is required to pay $1,440 on March 1, 2021. (show calculations)

16) What amount does Delta record as the note payable on October 1, 2020?

17) How much interest expense does Delta recognize on its income statement for 2020?

18)Gamma receives interest on a $900, 8%, 5-year note receivable each April 1. At December 31, 2017, the appropriate adjusting entry was made to accrue (recognize) interest receivable:

                  What journal entry should be made on April 1, 2018 when the annual interest payment is received?

            a.   Cash .....................................................................................               18

                              Interest Revenue ......................................................                                    18

            b.   Cash .....................................................................................               54

                              Interest Receivable ...................................................                                    54

            c.   Cash .....................................................................................               72

                              Interest Receivable ...................................................                                    54

                              Interest Revenue ......................................................                                    18

            d.   Cash .....................................................................................               72

                              Interest Revenue ......................................................                                    72

            e.   No journal entry should be made

19. During 2020, Sigma split its stock 5-for-2. After the split, each share was worth $100. What must each share have been worth before the split?

Answer 1

16 Notes payable on Oct 1, 2020 = Face value of the note = $1,440 The total value is payable as the shortfall in the amount received is will be the interest expense. 17 Total interest = Notes payable - Cash received = 1440 - 1400 = 40 Interest expense for 2020 = Total interest X 3/6 = 40 X 3/6 = $20 3/6 because Oct to Dec is 3 months out of the total 6 months. Debits Credits 18 72 General Journal No. Date Account Titles and Explanation 1-Apr Cash (900*8%) Interest Receivable (72*9/12) Interest Revenue (72*3/12) (To record the interest received) 54 18 Out of the total 12 months interest, 9 months (Apr to Dec) was accrued last year. Thus received from Interest Receivable account. The remaining 3 months (Jan to Mar) is received form interest revenue. 19 Share value before split = 100 X 5/2 = 250 2 shares were converted into 5 shares. At that time the value was 2/5. To reverse 5/2 Please give likes for the work. Thanks & Regards.