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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 11, Problem 6E
Textbook Problem
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Entries for discounted note payable

A business issued a 45-day note for $80,000 to a creditor on account. The note was discounted at 5%. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity.

a.

To determine

Journalize issuance of the note.

Explanation of Solution

Note Payable: Note payable is an obligation of the business to pay to its creditors, in future for the benefits received that carry some interest.

Journalize the entry to record the issuance of the note.

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

 Accounts Payable 79,500 
 Interest Expense (1) 500 
 Note Payable  80,000
 (To record the issuance of discounted notes on account)   

Table (1)

  • Accounts payable is a liability and it is decreased. So debit it by $79,500.
  • Interest Expense is a component of stockholders’ equity and decreased it. So, debit Interest Expense by $500...

b.

To determine

Journalize the payment of note at maturity.

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Chapter 11 Solutions

Financial Accounting
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