Question

On June 1, Waterway Company borrows $111,000 from First Bank on a 6-month, $111,000, 8% note.

Prepare the entry on June 1. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

a. Prepare the adjusting entry on June 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

b. Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

c. What was the total financing cost (interest expense)?

Total financing cost

$enter the total financing cost

Answer 1

	Date	Account Titles and Explanation	Debit	Credit
	June 1	Cash	$111,000
		Notes Payable		$111,000
		(To record issue of notes)
a.	June 30	Interest Expense	$740		($111,000 x 8% x 1/12)
		Interest Payable		$740
		(To record interest expense)
b.	Dec 1	Notes Payable	$111,000
		Interest Payable	$4,440		($111,000 x 8% x 6/12)
		Cash		$115,440
		(To record notes payable)
c.	Total financing cost $4,440