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. Target Corporation is one of America’s largest general merchandise retailers. Each Christmas, Target builds up its inventory to meet the needs of Christmas shoppers. A large portion of Christmas sales are on credit. As a result, Target often collects cash from the sales several months after Christmas. Assume that on November 1, 2015, Target borrowed $6.1 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 8.50 percent payable at maturity. The accounting period ends December 31.

value: 1.00 points Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Target Corporation is one of America's largest general merchandise retailers. Each Christmas, Target builds up its inventory to meet the needs of Christmas shoppers. A large portion of Christmas sales are on credit. As a result, Target often collects cash from the sales several months after Christmas. Assume that on November 1, 2015, Target borrowed $6.1 million cash from Metropolitan Bank and signed a promissory maturity. The accounting period ends December 31 note that matures in six months. The interest rate was 8.50 percent payable at Required 1,2&3. Complete the required journal entries to record the note on November 1, 2015, interest on the maturity date, April 30, 2016, assuming that interest has not been recorded since December 31 2015. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the borrowing of $6,100,000 Note: Enter debits before credits. Date General Journal Debit Credit November 01, 2015 Record entry Clear entry View general journal

Explanation / Answer

Nov 1, 2015 Cash $ 6,100,000 Note payable / Borrowings $ 6,100,000 (To record borrowings) Dec 31, 2015 Interest expenses ($6,100,000*8.5%*2M/12M) $        86,417 Interest payable $        86,417 (To record interest expenses accrued) April 30, 2016 Interest expenses ($6,100,000*8.5%*4M/12M) $     172,833 Interest payable $        86,417 Note payable / Borrowings $ 6,100,000 Cash $ 6,359,250 (To record repayment of borrowing with interest)

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.