Question

Kelly Jones and Tami Crawford borrowed $12,000 on a 7-month, % note from Gem State Bank to open their business, JC's Coffee Prepare the ertry to record the receiot of the funds from the loan (Credit acceunt tiles are automatically indented when ameunt is entered. Do not indend manualy Date Account Titles and Explanation House. The money was bomewed on June 1, 2017, and the note matures January 1, 2018. Credt Prepare the entry to accrue the rterest on >ne 30. (Oedit account titles areaudomatkally indented when amounts entend to motinant manilly Date Aocount Titles and Explanation une 30 Credit Assuming adjusting entries are made at the end of each month, determine the baliance in the interest payable account at December 31, 2017. Balance in esterest payable account Credit Jan. 1, 2018 Click if you would Ske to Show Werk for this question: pen Sho.Work

Answer 1

Answer

• All working forms part of the answer
• Answer: Balance in Interest payable account on Dec 31, 2017
  = 12000 x 6% x 7 months/12months
  = $ 420
  [1 June to 31 Dec = 7 months]
• Entries

Date	Accounts title	Debit	Credit
Jun-01	Cash	$12,000
	Notes payable		$12,000
	(Amount borrowed)
Jun-30	Interest Expense [12000 x 6% x 1/12]	$60
	Interest payable		$60
	(Interest for 1 month accrued)
Jan-01	Notes Payable	$12,000
	Interest payable [12000 x 6% x 7/12]	$420
	Cash		$12,420
	(Amount paid at maturity)