Instructions Eddie Edwards and Phil Bell own and operate The Second Hand Equipme
ID: 2608640 • Letter: I
Question
Instructions Eddie Edwards and Phil Bell own and operate The Second Hand Equipment Shop. The following transactions involving notes and interest were completed during the last three months of 20- Oct. 1 15 1 I 20 30 10 issued a $6,800, 60-day, 5% note to Mac Farm Equipment for purchase of merchandise. Received a $2,000, 60-day, 6% note from R. Chambers in payment for sale of merchandise Discounted the note received from R. Chambers on October 15 at Merchants Natonal Bank·The discount ale s 7%. Borrowed S5,000 from First National Bank on a three-month, non-interestbearing note that was discounted at 5%. Received a $4,000, 90-day, 6.5% note from L. Revsine in payment of an account receivable. Issued a check to Mac Farm Equipment in payment of the note issued on October 1, including interest. Issued a $3.000, 90-day, 6% note to Remak Tractors to extend time for payment of an account payable. Nov. Dec. 16 Received notification from Merchants National Bank that R. Chambers has dishonored his note. A check is issued to cover the note plus a $20 bank fee that must be paid to the bank. Required 1. Prepare general journal entries for the transactions. 2. Prepare necessary adjusting entries for the notes outstanding on December 31.Explanation / Answer
Journalise the following transactions:
General journal
Date
Account Title and Explanations
Ref.
Debit ($)
Credit ($)
oct. 1
Supplies
6,800
Notes payable 5%
6,800
To record the issue of 60 day notes payable for purchase of merchandise
oct. 15
Notes receivable 6%
2,000
R chambers
2,000
To record the receipt of notes receivable
Nov. 1
Cash
1,977
Interest expense 2,000*15%*60/360
23.33
Notes receivable 6%
2,000
To record the discounting of notes receivable
nov. 1
Cash
4,925
discount on notes payable
75
notes payable ( non-interest bearing)
5,000
To record the notes payable, issued at discount
nov. 20
notes receivable 6.5%
4,000
L. Revsine
4,000
To record the receipt of notes receivable
Nov. 30
Interest expense (6,800 * 60/360*5%)
1-Oct
57
notes payable 5%
57
To record the interest exepense
Nov. 30
Notes payable 5%
6,857
Cash
6,857
To record the payment of accounts payable to Mac farm
Dec. 10
notes payable 6% 90 days
3,000
remak tractors
3,000
To record the issue of notes receivable
16-Dec
r. Chambers
2,020
Notes receivable
2,000
Interest revenue
20
16-Dec
merchants national bank
2,020
Cash
2,020
To record the issue of cheque for dishonour of discounted notes payable
Date
Account Title and Explanations
Ref.
Debit ($)
Credit ($)
oct. 1
Supplies
6,800
Notes payable 5%
6,800
To record the issue of 60 day notes payable for purchase of merchandise
oct. 15
Notes receivable 6%
2,000
R chambers
2,000
To record the receipt of notes receivable
Nov. 1
Cash
1,977
Interest expense 2,000*15%*60/360
23.33
Notes receivable 6%
2,000
To record the discounting of notes receivable
nov. 1
Cash
4,925
discount on notes payable
75
notes payable ( non-interest bearing)
5,000
To record the notes payable, issued at discount
nov. 20
notes receivable 6.5%
4,000
L. Revsine
4,000
To record the receipt of notes receivable
Nov. 30
Interest expense (6,800 * 60/360*5%)
1-Oct
57
notes payable 5%
57
To record the interest exepense
Nov. 30
Notes payable 5%
6,857
Cash
6,857
To record the payment of accounts payable to Mac farm
Dec. 10
notes payable 6% 90 days
3,000
remak tractors
3,000
To record the issue of notes receivable
16-Dec
r. Chambers
2,020
Notes receivable
2,000
Interest revenue
20
16-Dec
merchants national bank
2,020
Cash
2,020
To record the issue of cheque for dishonour of discounted notes payable