A. The company has two interest -bearing long-term debt accounts. Twenty-year, 3

Question

A. The company has two interest -bearing long-term debt accounts. Twenty-year, 3% Bonds 600,000 2% Notes Payable to Banks 30,000 1) What is the journal entry in order to accrue interest expense? 2) Total interest paid on notes payable and bonds payable amounted to $17,415. 3) Assuming no beginning balance, what is the ending balance of Interest Payable? B. Gilbert Inc. closed a retail store in Miami at a loss of $35,800. The Original cost of building and equipment was $100,000 with a book value of $60,000. What is the journal entry and where should it be reported on the income statement?

Explanation / Answer

Part A

1) What is the journal entry in order to accrue interest expense?

Debit interest expenses $ 18600

Credit interest payable $ 18600

2) Total interest paid on notes payable and bonds payable amounted to $17,415.

Debit interest payable $ 17415

Credit Cash $ 17415

3) Remaining balance

Remaining difference would be the difference between payable and paid, that is 18600-17415 = $ 1185

Part B

Debit Cash A/c (60000-35800) $ 24200

Debit Loss on sale of assets $ 35800

Credit Building and Equipment $ 60000

It should be reported under other income/losses head.

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