Question

Apr. 8 Issued a $8,800, 75-day, 8% note payable in payment of an account with Bennett Company May 15 Borrowed $40,000, 60-day, 9% note from Lincoln Bank. Jun. 22 Paid Bennett Company the principal and interest due on the April 8 note payable. Jul. 6 Purchased $16,000 of merchandise from Bolton Company, signed an Jul 14 Paid the May 15 note due Lincoln Bank Oct. 2 Borrowed $28,000, 120-day, 12% note from Lincoln Bank. Oct. 4 Defaulted on the note payable to Bolton Company Required a. Record these transactions in general journal form. b. Record any adjusting entries for interest in general journal form. Logan Company has a December 31 year-end. Round answers to nearest dollar. Use 360 days for interest calculations.

Answer 1

ANSWER

As per the given question,

	Journal Entries
date	explanation	debit	credit
8-Apr	accounts payable	8800
	notes payable		8800
	(issued note payable)
15-May	cash	40000
	note payable		40000
	(borrowed from bank)
22-Jun	notes payable	8800		Interest	(8800*8%*75)/360	146.6667
	interest expense	146.6667
	cash		8946.667
	(payment made)
6-Jul	purchase	16000
	notes payable		16000
	(goods purchased on credit)
15-Jul	note payable	40000
	interest expense	600		Interest	(40000*60*9%)/360	600
	cash		40600
	(payment made)
2-Oct	cash	28000
	notes payable		28000
	(borrowed from bank)
4-Oct	notes payable	16000
	interest expense	394.5205		Interest	(16000*90*10%)/365	394.5205
	accounts payable		16394.52
	(default on payment of note)
31-Dec	interest expense	840
	interest payable		840	Interest	(28000*90*12%)/360	840
	interest due at year end
No of days interest due	29+30+31	120 days
Oct	29
nov	30
December	31
total no of days interest due upto dec 31	90

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