Samson Corporation issued a 4-year, $75,000, zero-interest-bearing note to Brown Company on January 1, 2017, and received cash of $47,664. The implicit interest rate is 12%. Prepare Samson's journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest. (Round answers to 0 decimal places, e. g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question

Asa Gordon

Business

21 September, 03:36

Samson Corporation issued a 4-year, $75,000, zero-interest-bearing note to Brown Company on January 1, 2017, and received cash of $47,664. The implicit interest rate is 12%. Prepare Samson's journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest. (Round answers to 0 decimal places, e. g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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Mitchell Fuller · Answer 1

The journal entries are shown below:

(A) Cash A/c Dr $47,664

Discount on note payable $27,336

To Note Payable $75,000

(Being note payable is issued)

(B) Interest expense A/c Dr $5,719.68

To Discount on note payable $5,719.68

(Being interest expense recorded)

The interest expense is computed by

= Cash received * implicit interest rate

= $47,664 * 12%

= $5,719.68