Explanation Notes payable A notes payable comes under liability side of balance sheet. It is a written promissory note under which lender provides debt to borrower and borrow repays the borrowed fund with fixed rate of interest at a specified time period. Journalizing: Journalizing is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. The journal entry records the issuance of notes payable on January 1, 2016 is shown below: Date Account Title and Explanation Post ref Debit ($) Credit ($) January 1 Cash 1,500,000 Long-term notes payable 1,500,000 (issuance of notes payable is recorded) Table (1) Cash received is debited as it is the asset of the company and any increase in asset are always debited. Long-term notes payable is credited as it is the liability and any increase in liability is always credited. Working Note: The calculation of quarterly amount of interest payment on notes payable is shown below; Interest payment = Amount of Borrowing × Rate of interest / 4 Substitute $1,500,000 for amount of borrowing and 8% rate of interest in the above formula, Interest payment = $ 1 , 500 , 000 × 8 % / 4 = $ 1 , 500 , 000 × 0

Intermediate Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (2nd Edition)

2nd Edition

ISBN: 9780134833118

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 14, Problem 14.3BE

To determine

To find: Journal entries of Corporation A on required dates.

Given information

Borrowed fund by Corporation A is $1,500,000.

Interest rate on borrowing is 8%.

Time period of borrowing is 5 years.

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Chapter 14, Problem 14.2BE

Chapter 14, Problem 14.4BE

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Chapter 14 Solutions

Intermediate Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (2nd Edition)

Ch. 14 - What conditions or terms does a note payable...Ch. 14 - If the market rate of interest exceeds the face or...Ch. 14 - What is included in bond issue costs and how...Ch. 14 - Prob. 14.4Q Ch. 14 - When a bond is issued at a discount, will its...Ch. 14 - Prob. 14.6Q Ch. 14 - Prob. 14.7Q Ch. 14 - Under IFRS, how do firms account for convertible...Ch. 14 - Prob. 14.9Q Ch. 14 - Can companies reclassify short-term debt expected...

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Journal entries of Corporation A on required dates. Given information Borrowed fund by Corporation A is $1,500,000. Interest rate on borrowing is 8%. Time period of borrowing is 5 years.

Solution Summary: The author explains the process of journalizing the transactions of an organization in a chronological order. The journal entry records the issuance of notes payable on January 1, 2016.

To find: Journal entries of Corporation A on required dates. Given information Borrowed fund by Corporation A is $1,500,000. Interest rate on borrowing is 8%. Time period of borrowing is 5 years.

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Chapter 14 Solutions

To find: Journal entries of Corporation A on required dates.

Given information

Borrowed fund by Corporation A is $1,500,000.

Interest rate on borrowing is 8%.

Time period of borrowing is 5 years.