Exercise 8-1 Bonny Smith and Tammy Wright borrowed S13,200 on a 7-month, S% note

Question

Exercise 8-1 Bonny Smith and Tammy Wright borrowed S13,200 on a 7-month, S% note from Gem State Bank to open their business, CS Coffee House. The money as borrowed on une 1 201, and the note matures Ja uan,-20 (a) Prepare a tabular summary to record the receipt of the funds from the loan. (b) Prepare a tabular summary to accrue the interest on June 30 (d) Prepare a tabular summary to record the repayment of the loan on January 1, 2018. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.) Assets Liabilitics Stockholders' Equity Retained Earnings CashNotes Pay.+Interest PaystononRevenue Common Stock +RevenueExpenseDividend (a) June t, 2017 (b)June 30, 2017 (d) Jan. 1, 2018 Assuming adjustments are made at the end of each month, determine the balance in the Interest Payable account at December 31, 2017 Balance in interest payable interest expense account

Explanation / Answer

Balance in interest payable = 13200*5%*7/12 = 385

Assets = Liabilities + Stockholder's equity Retained earnings Cash = Notes payable + Interest payable + Common Stock + Revenue - Expense - Dividend June 1,2017 13200 13200 June 30,2017 55 -55 Interest expense Jan 1,2018 -13585 -13200 -385

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