Exercise 10-1 Kelly Jones and Tami Crawford borrowed $9,600 on a 7-month, 10% no
ID: 2539600 • Letter: E
Question
Exercise 10-1
Kelly Jones and Tami Crawford borrowed $9,600 on a 7-month, 10% note from Gem State Bank to open their business, JC’s Coffee House. The money was borrowed on June 1, 2017, and the note matures January 1, 2018.
Date
Account Titles and Explanation
Debit
Credit
June 1
LINK TO TEXT
Date
Account Titles and Explanation
Debit
Credit
June 30
LINK TO TEXT
Balance in interest payable account
LINK TO TEXT
Date
Account Titles and Explanation
Debit
Credit
Jan. 1, 2018
Exercise 10-1
Kelly Jones and Tami Crawford borrowed $9,600 on a 7-month, 10% note from Gem State Bank to open their business, JC’s Coffee House. The money was borrowed on June 1, 2017, and the note matures January 1, 2018.
Explanation / Answer
Solution:
Journal Entries
Date
General Journal
Debit
Credit
June.1
Cash
$9,600
Notes Payable
$9,600
June.30
Interest Expense (9,600*10%*1/12)
$80
Interest Payable
$80
Balance in Interest Payable Account
Money Borrowed = June 1
Period to maturity = 7 month
Interest Payable Amount for 7 months (June 1 to Dec 31) = $9,600*10%*7/12 = $560
Journal Entry on Jan 1, 2018, when the loan is paid back
Date
General Journal
Debit
Credit
Jan.1, 2018
Notes Payable
$9,600
Interest Payable
$560
Cash
$10,160
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Date
General Journal
Debit
Credit
June.1
Cash
$9,600
Notes Payable
$9,600
June.30
Interest Expense (9,600*10%*1/12)
$80
Interest Payable
$80
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