s 004 Problem 9-01A Notes and Interest e McLaughlin Inc. operates with a June 30

Question

s 004 Problem 9-01A Notes and Interest e McLaughlin Inc. operates with a June 30 year-end. During 2014, the following transactions occurred: a. January i: Signed a one-year, 10% loan for $35,000 Interest and principal are to be paid at maturity. b. January 10: Signed a line of credit with Little Local Bank to establish a $560,000 line of e' credit. Interest of 9% will be charged on all borrowed funds. c. February I: Issued a $28,000 non-interest-bearing, six-month note to pay for a new machine. Interest on the note, at 12%, was deducted in advance. d. March 1: Borrowed $210,000 on the line of credit. e. June 1: Repaid $140,000 on the line of credit plus accrued interest f. June 30: Made all necessary adjusting entries. August 1: Repaid the non-interest-bearing note. h. September 1: Borrowed $280.000 on the line of credit November 1: Issued a three-month, 8%, $16,800 note in payment of an overdue open account. j. December 31: Repaid the one-year loan l from transaction (a) l plus accrued interest. Required: 1. Identify and analyze the effect of these transactions. When calculating interest use full months instead of days. Do final answers to the nearest dollar

Explanation / Answer

Interest expense workings:

Balance sheet

Event Date Assets = Liabilities + Equity Cash + Non-Cash = Accounts Payable + Loan payable + Note payable + Line of credit + Accrued liability + Paid-up + Revenue - Expense a Jan.1 35000 + = + 35000 + + + + + - b + = + + + + + + - c Feb.1 + 28000 = + + 28000 + + + + - d Mar.1 210000 + = + + + 210000 + + + - e June.1 -144725 + = + + + -140000 + + + - -4725 f June.30 + = + + + + 2275 + + - -2275 Total 100275 28000 0 35000 28000 70000 2275 0 0 -7000 Balance July.1 100275 28000 0 35000 28000 70000 2275 g Aug.1 -28000 + = + + -28000 + + + + - h Sept.1 280000 + = + + + 280000 + + + - i Nov.1 + = -16800 + + 16800 + + + + - j Dec.31 -38500 + = + -35000 + + + -1750 + + - -1750 k Dec.31 + = + + + + 11774 + + - -11774 Total 313775 + 28000 = -16800 + 0 + 16800 + 350000 + 12299 + 0 + 0 - -13524

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