VWXY Corporation on January 1, 2016 borrowed $10,000,000 by issuing a10 year lon
ID: 2528255 • Letter: V
Question
VWXY Corporation on January 1, 2016 borrowed $10,000,000 by issuing a10 year long-term note that paid interest semiannually. The interest on the note was 12 percent each year. Because market interest rates were somewhat higher than 12 percent at the data of the note issuance, the actual proceeds (i.e. amount of cash received) was $9,500,000.
A) What entry did VWXY Company make on January 1 to record the note issuance?
B) What entry did VWXY Corporation make on July 1 the date that the first semi-annual interest payment was made?
Explanation / Answer
Journal entry :
No Date Account & explanation debit credit a Jan 1 Cash 9500000 Discount on notes payable 500000 Notes payable 10000000 (To record note issuance) b July 1 Interest expense 575000 Discount on notes payable (500000/20) 25000 Cash (10000000*12%*6/12) 600000 (To record interest payment)Related Questions
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