Brief Exercise 10-2 Crane Company borrows $66,000 on July 1 from the bank by sig

Question

Brief Exercise 10-2 Crane Company borrows $66,000 on July 1 from the bank by signing a $66,000, 896, 1-year note payable. Prepare the journal entry to record the proceeds of the note. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July 1 Prepare the journal entry to record the accrued interest at December 31, assuming adjusting entries are made only at the end of the year. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31

Explanation / Answer

Solution:

Transaction

Date

General Journal

Debit

Credit

(a)

July.1

Cash

$66,000

Notes Payable

$66,000

(b)

Dec.31

Interest Expense

$2,640

Interest Payable

$2,640

Note 1

Interest is recorded for the 6 months from July 1 to Dec 31.

Interest Expense = $66,000*8%*6 months / 12 = $2,640

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Transaction

Date

General Journal

Debit

Credit

(a)

July.1

Cash

$66,000

Notes Payable

$66,000

(b)

Dec.31

Interest Expense

$2,640

Interest Payable

$2,640

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