Corporation borrowed $1,950,000 on November 1, 2015. The note carried a 9 percen
ID: 2415206 • Letter: C
Question
Corporation borrowed $1,950,000 on November 1, 2015. The note carried a 9 percent interest rate with the principal and interest payable on June 1, 2016.
(a)
The note issued on November 1.
(b)
The interest accrual on December 31.
Assets
=
Liabilities
+
Stockholders’ Equity
(a)
(b)
2.
Prepare the journal entries related for the above transactions:
a. Greener Pastures Corporation borrowed $1,950,000 on November 1, 2015. The note carried a 9 percent interest rate with the principal and interest payable on June 1, 2016. Record the borrowing of $1,950,000 (for November 1st)
b. Greener Pastures Corporation borrowed $1,950,000 on November 1, 2015. The note carried a 9 percent interest rate with the principal and interest payable on June 1, 2016. Record the interest accrued on the notes payable. (for December 31st)
(a)
The note issued on November 1.
(b)
The interest accrual on December 31.
Explanation / Answer
Assets = liabiltiies + Stockholder's Equity
(a) $1,950,000 = 1,950,000 +0
(b) 0 = 29,250 - 29,250
Journal entry
Date Description Debit Credit Nov 1 ,2015 Cash $1,950,000 To Notes payable $1,950,000 Dec 31 Interest expense $29,250 To Interest Payable $29,250