a. Explanation Notes Payable: The notes payable refers to the promissory note which is issued by debtors to their creditors to compensate the accounts payable issued previously to creditors. This includes the loan from bank accounts. 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 the balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue, and gains. To decrease the balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue, and gains. The issuance of a note payable. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) January 1, 2015 Cash 411,697 Discount on notes payable 75,303 Long-term notes payable 487,000 (being difference in the issue of price and face value of notes payable is recorded) Table (1) Cash is an asset account and with the issue of the shares, the cash balance is increased and hence the cash account is debited. Discount on notes payable is an asset account and when the discount is recorded, the account is debited. Long-term notes payable is a liability account and the issue of the notes payable increases the liability of the company, hence it is credited. As the note period is 4 years, hence the note payable is of long-term... b. To determine To prepare: The amortization table for the note. c. To determine To prepare: The entry to record on December 31, 2014. d. To determine To prepare: The entry to record on March 31, 2015.

2nd Edition

ISBN: 9780134730370

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

Publisher: PEARSON

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Chapter 14, Problem 14.4E

To determine

To prepare: The entry to record the issuance of the note payable.

Given information:

The amount borrowed is $487,000.

Annual interest rate is 8%.

Time period is 3 years.

To determine

To prepare: The amortization table for the note.

To determine

To prepare: The entry to record on December 31, 2014.

To determine

To prepare: The entry to record on March 31, 2015.

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Chapter 14, Problem 14.3E

Chapter 14, Problem 14.5E

Chapter 14 Solutions

Intermediate Accounting (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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The entry to record the issuance of the note payable. Given information: The amount borrowed is $487,000. Annual interest rate is 8%. Time period is 3 years.

Solution Summary: The author explains the process of journalizing the transactions of an organization in a chronological order.

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To prepare: The entry to record the issuance of the note payable. Given information: The amount borrowed is $487,000. Annual interest rate is 8%. Time period is 3 years.

To prepare: The amortization table for the note.

To prepare: The entry to record on December 31, 2014.

To prepare: The entry to record on March 31, 2015.

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Chapter 14 Solutions

To prepare: The entry to record the issuance of the note payable.

Given information:

The amount borrowed is $487,000.

Annual interest rate is 8%.

Time period is 3 years.