Problem 7-15 (Part Level Submission) On January 1, 2017, Bonita Company issued a

Question

Problem 7-15 (Part Level Submission) On January 1, 2017, Bonita Company issued a $1,229,100, 5-year, zero-interest-bearing note to Windsor Bank. The note was issued to yield 9% annual interest. Unfortunately, during 2018 Bonita fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 2018, Windsor Bank decided that the loan was impaired. Bonita will probably pay back only $819,400 of the principal at maturity Prepare journal entries for both Bonita Company and Windsor Bank to record the issuance of the note on January 1, 2017. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g.5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit Bonita Company (Debtor): 1. Windsor Bank (Creditor): 2. Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Solution :

Journal Entries No. Account title and Explanations Debit Credit Bonita Company (Debtor): 1 Cash A/c Dr ($1,229,100 * 0.649931) $798,830.67         To Note Payable $798,830.67 (Being note issued) Windsor bank (Creditor): 2 Note Receivable Dr $798,830.67         To Cash A/c $798,830.67 (Being note issuance by Bonita company to Windsor bank)

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