(a) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Journal entry for money borrowed.

Question

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Answer 1

Question

Chapter 9, Problem 92PSA

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSA

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSA

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st May.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $150,000 × 6.4%

Interest Expense (annual) = $9,600

Since, the interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 612

Interest Expense (for 6 months) = $9,600 × 612

Interest Expense (for 6 months) = $4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st May 2020.

Expert Solution

Answer to Problem 92PSA

Journal Entry for Interest Payment on 31^st May 2020

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2020 until 31^st May 2020 as well as payment for interest payable for previous 6 months i.e. 1^st June 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Interest Expense for previous 6 months was transferred to interest payable whereas for next 6 months it was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSA

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSA

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	150,000 4,800 4,800	159,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2022 until 31^st May 2022 as well as payment for interest payable for previous 6 months i.e. 1^st June 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st May 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Cash	150,000	150,000

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Answer 2

Question

Chapter 9, Problem 92PSA

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSA

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSA

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st May.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $150,000 × 6.4%

Interest Expense (annual) = $9,600

Since, the interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 612

Interest Expense (for 6 months) = $9,600 × 612

Interest Expense (for 6 months) = $4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st May 2020.

Expert Solution

Answer to Problem 92PSA

Journal Entry for Interest Payment on 31^st May 2020

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2020 until 31^st May 2020 as well as payment for interest payable for previous 6 months i.e. 1^st June 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Interest Expense for previous 6 months was transferred to interest payable whereas for next 6 months it was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSA

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSA

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	150,000 4,800 4,800	159,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2022 until 31^st May 2022 as well as payment for interest payable for previous 6 months i.e. 1^st June 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st May 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Cash	150,000	150,000

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Answer 3

Question

Chapter 9, Problem 92PSA

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSA

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSA

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st May.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $150,000 × 6.4%

Interest Expense (annual) = $9,600

Since, the interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 612

Interest Expense (for 6 months) = $9,600 × 612

Interest Expense (for 6 months) = $4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st May 2020.

Expert Solution

Answer to Problem 92PSA

Journal Entry for Interest Payment on 31^st May 2020

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2020 until 31^st May 2020 as well as payment for interest payable for previous 6 months i.e. 1^st June 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Interest Expense for previous 6 months was transferred to interest payable whereas for next 6 months it was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSA

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSA

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	150,000 4,800 4,800	159,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2022 until 31^st May 2022 as well as payment for interest payable for previous 6 months i.e. 1^st June 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st May 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Cash	150,000	150,000

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Answer 4

Question

Chapter 9, Problem 92PSA

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSA

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSA

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st May.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $150,000 × 6.4%

Interest Expense (annual) = $9,600

Since, the interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 612

Interest Expense (for 6 months) = $9,600 × 612

Interest Expense (for 6 months) = $4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st May 2020.

Expert Solution

Answer to Problem 92PSA

Journal Entry for Interest Payment on 31^st May 2020

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2020 until 31^st May 2020 as well as payment for interest payable for previous 6 months i.e. 1^st June 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Interest Expense for previous 6 months was transferred to interest payable whereas for next 6 months it was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSA

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSA

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	150,000 4,800 4,800	159,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2022 until 31^st May 2022 as well as payment for interest payable for previous 6 months i.e. 1^st June 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st May 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Cash	150,000	150,000

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Answer 5

Chapter 9, Problem 92PSA

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSA

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSA

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st May.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $150,000 × 6.4%

Interest Expense (annual) = $9,600

Since, the interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 612

Interest Expense (for 6 months) = $9,600 × 612

Interest Expense (for 6 months) = $4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st May 2020.

Expert Solution

Answer to Problem 92PSA

Journal Entry for Interest Payment on 31^st May 2020

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2020 until 31^st May 2020 as well as payment for interest payable for previous 6 months i.e. 1^st June 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Interest Expense for previous 6 months was transferred to interest payable whereas for next 6 months it was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSA

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSA

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	150,000 4,800 4,800	159,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2022 until 31^st May 2022 as well as payment for interest payable for previous 6 months i.e. 1^st June 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st May 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Cash	150,000	150,000

Answer 6

Chapter 9, Problem 92PSA

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Expert Solution

Answer to Problem 92PSA

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

Answer 7

Chapter 9, Problem 92PSA

To determine

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Answer 8

Expert Solution

Answer to Problem 92PSA

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The face value of Notes issued is recorded as notes payable and any premium or discount on issue of notes is recorded in separate “Premium on Notes Payable” or “Discount on Notes Payable” account whereas in case of issuance of notes at par it is a regular journal entry where cash (asset) increased along with Notes Payable (long term liability).

Journal Entry for issuance of Notes at par

Date	Particulars	Debit ($)	Credit ($)
1^st June 2019	Cash Dr. Notes Payable	150,000	150,000

Answer 13

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Expert Solution

Answer to Problem 92PSA

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st May.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $150,000 × 6.4%

Interest Expense (annual) = $9,600

Since, the interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 612

Interest Expense (for 6 months) = $9,600 × 612

Interest Expense (for 6 months) = $4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Answer 14

To determine

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Answer 15

Expert Solution

Answer to Problem 92PSA

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The borrower is entitled to pay interest periodically, unless stated otherwise.

As per the question, the principal and interest is payable annually on 31^st May.

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Adjusting Journal Entry on 31^st December 2020

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

Interest Expense (annual) = Face Value of note × Stated Interest Rate

Interest Expense (annual) = $150,000 × 6.4%

Interest Expense (annual) = $9,600

Since, the interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Interest Expense (for 6 months) = Interest Expense (annual) × 612

Interest Expense (for 6 months) = $9,600 × 612

Interest Expense (for 6 months) = $4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Answer 20

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st May 2020.

Expert Solution

Answer to Problem 92PSA

Journal Entry for Interest Payment on 31^st May 2020

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2020 until 31^st May 2020 as well as payment for interest payable for previous 6 months i.e. 1^st June 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Interest Expense for previous 6 months was transferred to interest payable whereas for next 6 months it was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

Answer 21

To determine

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st May 2020.

Answer 22

Expert Solution

Answer to Problem 92PSA

Journal Entry for Interest Payment on 31^st May 2020

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Adjusting Journal Entry on 31^st December 2019

Date	Particulars	Debit ($)	Credit ($)
31^st December 2019	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2020 until 31^st May 2020 as well as payment for interest payable for previous 6 months i.e. 1^st June 2019 until 31^st December 2019.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2020	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

Interest Expense for previous 6 months was transferred to interest payable whereas for next 6 months it was recorded as expense only. Hence, Interest Expense and Interest Payable were debited whereas cash is being paid so it was credited.

Answer 27

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Expert Solution

Answer to Problem 92PSA

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

Answer 28

To determine

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Answer 29

Expert Solution

Answer to Problem 92PSA

Liability in Balance Sheet for year ending on 31^st December 2020

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2020	Interest Expense Dr. Interest Payable	4,800	4,800

This will create a short term liability “Interest Payable” in the balance sheet.

Besides, the money borrowed against note is repayable on maturity. Hence, Notes Payable value will remain unchanged.

Liability	Sub-total ($)	Total ($)
Interest Payable Total Current Liability	4,800	4,800
Bonds Payable Total Long term Liability	150,000	150,000
Total Liability	-	154,800

Answer 34

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Expert Solution

Answer to Problem 92PSA

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	150,000 4,800 4,800	159,600

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2022 until 31^st May 2022 as well as payment for interest payable for previous 6 months i.e. 1^st June 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st May 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Cash	150,000	150,000

Answer 35

To determine

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Answer 36

Expert Solution

Answer to Problem 92PSA

Combined Journal entry for payment of last year interest and repayment of note

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Interest Expense Dr. Interest Payable Dr. Cash	150,000 4,800 4,800	159,600

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

Given:

Borrowed $150,000 for 3years 6.4% note on 1^st June 2019 (interest paid annually on 31^st May).

The interest is to be paid annually on 31^st May so an adjusting entry will be posted as interest payable for 6 months on 31^st December (every year until maturity).

Date	Particulars	Debit ($)	Credit ($)
31^st December 2021	Interest Expense Dr. Interest Payable	4,800	4,800

Hence, an adjusting entry for 6 months interest payable of $4,800 will be recorded in the books of accounts on 31^st December (every year until maturity).

Following is the journal entry to record the payment of interest expense for remaining 6 months i.e. from 1^st January 2022 until 31^st May 2022 as well as payment for interest payable for previous 6 months i.e. 1^st June 2021 until 31^st December 2021.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Interest Expense Dr. Interest Payable Dr. Cash	4,800 4,800	9,600

The money borrowed on issue of note is payable at maturity after 3 years of issue date i.e. 31^st May 2022.

Date	Particulars	Debit ($)	Credit ($)
31^st May 2022	Notes Payable Dr. Cash	150,000	150,000

Answer 41

Ch. 9 - Prob. 1DQ Ch. 9 - What is the difference between a bond and a note?...Ch. 9 - What does the face (or Par) value of a bond...Ch. 9 - Prob. 4DQ Ch. 9 - What is the stated or coupon rate of a bond?Ch. 9 - Prob. 6DQ Ch. 9 - How does a secured bond differ from an unsecured...Ch. 9 - Prob. 8DQ Ch. 9 - Prob. 9DQ Ch. 9 - Prob. 10DQ

(a) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Journal entry for money borrowed.

Videos

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

Answer to Problem 92PSA

Explanation of Solution

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

Answer to Problem 92PSA

Explanation of Solution

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st May 2020.

Answer to Problem 92PSA

Explanation of Solution

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

Answer to Problem 92PSA

Explanation of Solution

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.

Answer to Problem 92PSA

Explanation of Solution

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Chapter 9 Solutions

(a) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Journal entry for money borrowed.

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(a) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Journal entry for money borrowed.

Answer to Problem 92PSA

Explanation of Solution

(b) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Adjusting Journal entry on 31st December 2019 and 2020.

Answer to Problem 92PSA

Explanation of Solution

(c) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Interest payment on 31st May 2020.

Answer to Problem 92PSA

Explanation of Solution

(d) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To show: Liability on balance sheet for year ending on 31st December 2020.

Answer to Problem 92PSA

Explanation of Solution

(e) Introduction: When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”. To record: Repayment of note and interest for last year.

Answer to Problem 92PSA

Explanation of Solution

Want to see more full solutions like this?

Chapter 9 Solutions

(a)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Journal entry for money borrowed.

(b)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Adjusting Journal entry on 31^st December 2019 and 2020.

(c)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Interest payment on 31^st May 2020.

(d)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To show:

Liability on balance sheet for year ending on 31^st December 2020.

(e)

Introduction:

When a company borrows money, a formal agreement for repayment of money and stated rate of interest is signed. This is regarded as “Note” or “Notes Payable”.

To record:

Repayment of note and interest for last year.