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19 March, 10:30

Crane Company borrows $50,600 on July 1 from the bank by signing a $50,600, 11%, one-year note payable. (a) Prepare the journal entry to record the proceeds of the note. (b) Prepare the journal entry to record accrued interest at December 31, assuming adjusting entries are made only at the end of the year.

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  1. 19 March, 10:53
    0
    The journal entries are shown below:

    (A) Cash A/c Dr $50,600

    To Notes payable A/c $50,600

    (Being note is issued for cash)

    (B) Interest expense A/c Dr $2,783

    To Interest payable A/c $2,783

    (Being accrued interest adjusted)

    The computation is shown below:

    = Principal * rate of interest * number of month : (total number of months in a year)

    = $50,600 * 11% * (6 months : 12 months)

    = $2,783

    The six month is calculated from the July 1 to December 31
  2. 19 March, 10:57
    0
    a) July 1

    Dr - Bank $50,600

    Cr - Notes Payable. $50,600

    b) Dec 31

    Calculate the interest

    $50,600*11% / 12 * 6 = $2,783

    Dr - interest Expense $2,783

    Cr - Interest Payable. $2,783
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