To attract retailers to its shopping center, the Marketplace Mall will lend mone

Question

To attract retailers to its shopping center, the Marketplace Mall will lend money to tenants under formal contracts, provided that they use it to renovate their store space. On November 1, 2010, the company loaned $10,800 to a new tenant on a one-year note with a stated annual interest rate of 8 percent. Interest is to be received by Marketplace Mall on April 30, 2011, and at maturity on October 31, 2011. 1. Prepare journal entries that Marketplace Mall would record related to this note on the following dates: (a) November 1, 2010; (b) December 31, 2010 (Marketplace Mall

Explanation / Answer

a. November 1, 2010 Debit: notes payable 10,800 credit: Cash 10,800 b. December 31, 2010 Debit: Interest receivable 144 Credit: Interest revenue 144 10,800*.08*2/12 = 144 c. April 30, 2011 Debit: Cash 432 Credit: Interest revenue 288 Credit: Interst receivable 144 10,800*.08/2 = 432 d. October 31, 2011 Debit: Cash 11,232 Credit: Interest revenue 432 Credit: notes payable 10,800 10,800*.08/2 = 432

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