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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

As a result of a loan from Plateau State Bank, Trent Company signed a 90-day note, dated March 12, for $12,700 that the bank discounted at 7 percent. Journalize the entries for the maker in general journal form to record the following, assuming that the note is paid in the same fiscal period.

  1. a. Issuance of the note on March 12.
  2. b. Payment of the note at maturity.

Check Figure

3/12 Interest Expense,

$222.25

a.

To determine

Journalize the issuance of note on March 12.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journalize the issuance of discounted note on March 12.

Date Account Titles and Explanation Post Ref. Debit ($) Credit ($)
March 12 Cash   12,477.75  
    Interest Expense   222.25  
       Notes Payable     12,700.00
    (Record discounted note payable issued)      

Table (1)

Description:

  • Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
  • Interest Expense is an expense account...

b.

To determine

Journalize the payment of principal amount on June 10 (maturity date).

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