Rob Judson Company had the following transactions involving notes payable. July

Question

Rob Judson Company had the following transactions involving notes payable.

July 1, 2010 Borrows $50,000 from Third National Bank by signing a 9-month, 12% note.
November 1,2010 Borrows $60,000 from DeKalb State Bank by signing a 3-month, 10% note.
December 31, 2010 Prepares adjusting entries.
February 1, 2011 Pays principal and interest to DeKalb State Bank.
April 1, 2011 Pays principal and interest to Third National Bank.


Instructions
Prepare journal entries for each of the transactions shown above. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Explanation / Answer

Dr. Cash $50,000 Cr. Notes Payable $50,000 Recorded 9-month note, 12% Nov. 1, 2011 Dr. Cash $60,000 Cr. Notes Payable $60,000 Recorded 3-month note, 10% Dec. 31 Dr. Notes Interest Expense $3,000 Cr. Interest Payable $3,000 ($50,000 * 0.12 * 6/12) Dr. Notes Interest Expense $1,000 Cr. Interest Payable $1,000 ($60,000 * 0.10 * 2/12) Feb. 1, 2012 Dr. Notes Payable, DeKalb $60,000 Dr. Interest Payable $1,500 Cr. Cash $33,000 ($60,000 * 0.10 * 3/12) Apr. 1, 2012 Dr. Notes Payable, TNB $50,000 Dr. Interest Payable $4,500 Cr. Cash $54,500 ($50,000 * 0.12 * 9/12)

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