College Accounting (Book Only): A ...
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College Accounting (Book Only): A ...
On August 5, M. Valenty borrowed $8,500 from Costner State Bank for 45 days, with a discount rate of 7 percent. Accordingly, M. Valenty signed a note for $8,500, dated August 5. Write entries in general journal form to record the following transactions:
- a. Issuance of the note on August 5.
- b. Payment of the note at maturity on September 19.
Check Figure
8/5 Notes Payable, $8,500
a.
Journalize the issuance of note on August 5.
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
- Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
Journalize the issuance of discounted note on August 5.
| Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
| August | 5 | Cash | Â | 8,425.62 | Â | |
| Â | Â | Interest Expense | Â | 74.38 | Â | |
| Â | Â | Â Â | Notes Payable | Â | Â | 8,500.00 |
| Â | Â | (Record discounted note payable issued) | Â | Â | Â | |
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.
Journalize the payment of principal amount on September 19 (maturity date).
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