esse Company adjusts its accounts monthly and closes its accounts on December 31

Question

esse Company adjusts its accounts monthly and closes its accounts on December 31. On October 31, year 1, Jesse Company signed a note payable and borrowed $110,000 from a bank for a period of six months at an annual interest rate of 6 percent. a. How much is the total interest expense over the life of the note? How much is the monthly interest expense? (Assume equal amounts of interest expense each month.) b. In the company’s annual balance sheet at December 31, year 1, what is the amount of the liability to the bank? c. & d. Prepare the journal entry to record issuance of the note payable on October 31, year 1 and the adjusting entry to accrue interest on the note at December 31, year 1. e. Assume the company prepared a balance sheet at March 31, year 2. State the amount of the liability to the bank at this date. a=3300 total int, 550 monthly int, b = bank liability is 111,100, c= cash/notes payable is 110,000 and int exp/int payable is 550, so what is the answer to e

Explanation / Answer

a)total ineterest expense over the life of the note is (110000*6%*6/12)= 3300 the monthly interest expense is 3300/6 = 550 b) the laibility to the bank at december 31 is (110000principle+1100interest accrued) = 111100 c) particulrs Debit credit cash a/c Dr 110000 notes payable 110000 d) interest exp a/c Dr 550 interest payable 550 (110000*6%*1/12) e) the lability to the bank at march is principal 110000 + 2750 accrued interest that is $112750

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