Many businesses borrow money during periods of increased business activity to fi

Question

Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable General Harbor Corporation is one of America's largest general merchandise retailers. Each Christmas, General Harbor builds up its inventory to meet the needs of Christmas shoppers. A large portion of Christmas sales are on credit. As a result, General Harbor often collects cash from the sales several months after Christmas. Assume that on November 1, 2015, General Harbor borrowed $7.6 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 7.00 percent payable at maturity. The accounting period ends December 31 Required Indicate the accounts, amounts, and effects of the (a) issuance of the note on November 1; (b) impact of the adjusting entry on December 31, 2015; and (c) the payment of the note and interest on April 30, 2016, on the accounting equation. (Do not round intermediate calculations. Enter your answers in whole dollars. Enter any decreases to account balances with a minus sign.) ecember 31, 201 pri 30, 2016

Explanation / Answer

Accounting equation :

Assets = Liabilities + Stockholder's equity November 1,2015 Cash 7600000 = Notes payable 7600000 December 31,2015 Interest payable 88667 + Interest expenses -88667 April 30, 2016 Cash -7866000 Notes payable -7600000 Interest payable -88667 Interest expense -177333

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