Griffin Enterprises issues a $625,000, 45-day, 10% note to Romo Industries for m

Question

Griffin Enterprises issues a $625,000, 45-day, 10% note to Romo Industries for merchandise inventory.

Required: A. Journalize Griffin Enterprises’ entries to record (refer to the company’s Chart of Accounts for exact wording of account titles): 1. the issuance of the note on January 1. 2. the payment of the note at maturity. Assume a 360-day year. B. Journalize Romo Industries’ entries to record (refer to the company’s Chart of Accounts for exact wording of account titles): 1. the receipt of the note on January 1. 2. the receipt of the payment of the note at maturity. Assume a 360-day year.

Explanation / Answer

A.

Griffin Enterprises’ entries to record:

1

the issuance of the note on January 1.

Date

Accounts Titles / Explanations

Debit

Credit

Jan. 1

Accounts Payable

$625,000.00

Notes Payable

$625,000.00

(Being notes issue for inventory)

2

The payment of the note at maturity:

Date

Accounts Titles / Explanations

Debit

Credit

Feb. 15

Notes Payable

$625,000.00

(Jan 1 +45 Days)

Interest Expense (625000*10%*45/360)

$    7,812.50

Cash (625000+7812.50)

$632,812.50

(Being payment made for note and interest)

B.

Romo Industries’ entries to record:

1

the receipt of the note on January 1.

Date

Accounts Titles / Explanations

Debit

Credit

Jan. 1

Notes receivables

$625,000.00

Accounts receivables

$625,000.00

(being note receivables accepted)

2

The receipt of the payment of the note at maturity:

Feb. 15

Cash (625000+7812.50)

$632,812.50

(Jan 1 +45 Days)

Interest Earned (625000*10%*45/360)

$    7,812.50

Notes receivables

$625,000.00

(being amount received for notes receivables)

A.

Griffin Enterprises’ entries to record:

1

the issuance of the note on January 1.

Date

Accounts Titles / Explanations

Debit

Credit

Jan. 1

Accounts Payable

$625,000.00

Notes Payable

$625,000.00

(Being notes issue for inventory)

2

The payment of the note at maturity:

Date

Accounts Titles / Explanations

Debit

Credit

Feb. 15

Notes Payable

$625,000.00

(Jan 1 +45 Days)

Interest Expense (625000*10%*45/360)

$    7,812.50

Cash (625000+7812.50)

$632,812.50

(Being payment made for note and interest)

B.

Romo Industries’ entries to record:

1

the receipt of the note on January 1.

Date

Accounts Titles / Explanations

Debit

Credit

Jan. 1

Notes receivables

$625,000.00

Accounts receivables

$625,000.00

(being note receivables accepted)

2

The receipt of the payment of the note at maturity:

Feb. 15

Cash (625000+7812.50)

$632,812.50

(Jan 1 +45 Days)

Interest Earned (625000*10%*45/360)

$    7,812.50

Notes receivables

$625,000.00

(being amount received for notes receivables)

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