Question

Exercise 10-1 C.S. Lewis Company had the following transactions involving notes payable. July 1, 2017 Borrows $61,500 from First National Bank by signing a 9-month, 8% note. Nov. 1, 2017 Borrows $73,800 from Lyon County State Bank by signing a 3-month, 6% note. Dec. 31, 2017 Prepares adjusting entries. Feb. 1, 2018 Pays principal and interest to Lyon County State Bank. Apr. 1, 2018 Pays principal and interest to First National Bank. Prepare journal entries for each of the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record adjusting entry for First National Bank note) (To record adjusting entry for Lyon County State Bank note) Feb. 1, 2018 Apr. 1, 2018

Answer 1

Credit Date Accounts tittle Debit 1-Jul-17 Cash $ 61,500 Notes payable $ 61,500 $ 73,800 | 1-Nov-17 Cash Notes payable $ 73,800 $ 3,198 Refer working note-1 31-Dec-17 Interest expense Interest payable $ 3,198 Refer working note-2 1-Feb-18 Notes payable $ Interest Expense $ Interest payable $ Cash 73,800 369 738 $ 74,907 Refer working note-3 1-Apr-18 Notes payable $ Interest Expense $ Interest payable $ Cash 61,500 1,230 2,460 $ 65,190

Working note-1 Interest expense in 2017 Interest on 8% Note receivable Interest on 6% Note receivable Interest payable for 2017 $ 61,500*8%*6/12 $ $ 73,800*6%*2/12 $ $ 2,460 |(for 6 Months) 738 (for 2 Months) 3,198 Working Note-2 Payment made on 01-Feb-2018 Notes payable 6% Interest payable for 2017 Interest expense for 2018 ($ 73,800*6%*1/12) 73,800 738 369 74,907 Working Note-3 Payment made on 01-Apr-2018 Notes payable 8% Interest payable for 2017 Interest expense for 2018 ($ 61,500*8%*3/12) 61,500 2,460 1,230 65,190