CHAPTER TEN REVIEW QUESTIONS 1. Notes payable On September 1, 2000, Jared Associ
ID: 2595223 • Letter: C
Question
CHAPTER TEN REVIEW QUESTIONS 1. Notes payable On September 1, 2000, Jared Associates borrowed S300,000 from Hometown Credit Union and signed a 14%, one-year note payable, all due at maturity. (a) The amount Jared must pay on September 1, 2001, when the note matures is (b) The interest expense Jared will recognize on this note in 2001 is (c) At December 31, 2000, Jared Associates' liability to the credit union amounts to (d) Give the adjusting entry made by Jared Associates on December 31, 2000, with respect to this note 2. Notes payable Credit Union and signed a 9%, one-year note payable, all due at maturity. The interest on this loan is stated On September 1, 2000, Lansdale Grange borrowed S200,000 from State Employces awpurat ly (a) The amount Lansdale must pay on September 1,2001, when the note matures is (b) The interest expense Lansdale will recognize on this note in 2001 is (c) At December 31, 2000, Lansdale Grange's overall liability for this loan amounts to (d) Give the adjusting entry made by Lansdale Grange on December 31, 2000, with respect to this noteExplanation / Answer
Amount borrowed=$300,000
Interest rate=14%
Interest is payable at maturity.
Loan taken on September 01, 2000.
Answer for question no.a:
Interest for one year=$300,000*14%
=$42,000.
So, the total amount payable=Principal+Interest
=$300,000+$42,000
=$342,000.
Answer for question no.b:
The interest expense Jared will recognize on this note in 2001 is for 8 months ie., from January 2001 to August 2001.
So, interest expense for 2001 =$42,000*8/12
=$28,000.
Answer for question no.c:
At December 31, 2000, Jared Associates’ liability to the credit union amounts to $42,000*4/12
=$14,000.
Answer for question no.d:
Adjusting entry made by Jared Associates on December 31, 2000, with respect to this note is as follows:
Interest expense a/c Dr $14,000
To Interest payable a/c Cr $14,000
(Being interest expense for the year recorded)