On November 1, Tam Corporation borrows $460,000 from a bank at 6% interest for 6

Question

On November 1, Tam Corporation borrows $460,000 from a bank at 6% interest for 6 months due May 1. The principal and interest are both due at maturity. What journal entry should Tam Corporation make on November 1? Dr Cash 460000 Cr Notes Payable 460000 What effect does this entry have on the accounting equation? AssetsLiabilitiesEquity | Increase :- Increase + No Change : What journal entry should Tam Corporation make concerning this note on December 31? Dr Interest Expense Cr Interest Payable What effect does this entry have on the accounting equation? Assets iailitiesEquity | No Change; F1 Increase + Decrease

Explanation / Answer

First entry is correct 2) entry For Interest expenses amount is 460000*6%*2/12 4600 Dr Cr Interest expenses $4,600 Interest payable $4,600 Assets Liabilities Equity No change Increase Decraese On May 1 Entry is Notes payable $460,000 Interest expenses (460000*6%*4/12) 9200 Interest payable $4,600 Cash $473,800 Assets Liabilities Equity Decrease Decrease Decraese If any doubt please comment. If satisfied you can rate

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