(8 marks Question 3 On June 1, Pearl Ltd borrows $20,000 from their bank by sign

Question

(8 marks Question 3 On June 1, Pearl Ltd borrows $20,000 from their bank by signing a 2 month interest-bearing note. Prepare the necessary entries below associated with the note payable on the Pearl Ltd. Required: (a) Prepare the entry on June 1 when the note was issued. (b) Prepare any adjusting entries necessary on 30 June in order to prepare the month financial statements. Assume no other interest accrual entries have been made. (c) Prepare the entry to record payment of the note at maturity. Page 6 of 8

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit June 1 Cash 20000 Notes payable 20000 (To record amount borrow) June 30 Interest expense (20000*12%*1/12) 200 Interest payable 200 (To record accural interest) July 31 Notes payable 20000 Interest expense 200 Interest payable 200 Cash 20400 (To record payment of notes)

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.