CC10-1 Accounting for Debt Financing ILO 10-2] Nicole thinks that her business,

Question

CC10-1 Accounting for Debt Financing ILO 10-2] Nicole thinks that her business, Nicole's Getaway Spa (NGS), is doing really well and she is planning a large expansion. With such a large expansion, Nicole will need to finance some of it using debt She signed a one-year note payable with the bank for $58,000 with a 5 percent interest rate. The note was issued October 1, 2014 interest is payable semiannually, and the end of Nicole's accounting period is December 31 Required: Prepare the journal entries required from the issuance of the note until its maturity on September 30, 2015, assuming that no entries are made other than at the end of the accounting period, when interest is payable, and when the note reaches its maturity. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.) View transaction list 1 Record the borrowing of $58,000. 2 Record the accrued interest on December 31, 2014. Record the interest payment on March 31, 2015, assuming no interest accrual has been recorded since December 31, 2014. 3 4 Record the interest payment on September 30, 2015, Credit assuming no interest accrual has been recorded since the payment on March 31, 2015. 5 Record the repayment of the note on its maturity date. Note: -journal entry has been entered Record entry Clear entry View general journal

Explanation / Answer

Oct-1-14 Cash 58000       Notes payable 58000 Dec-31-14 Interest expense 725 =58000*5%/12*3       Interest payable 725 Mar-31-15 Interest expense 725 Interest payable 725        Cash 1450 Sep-30-15 Interest expense 1450 =58000*5%/12*6       Interest payable 1450 Oct-1-15 Notes payable 58000        Cash 58000

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