Adjusting Entries for Interest At December 31, 2014, Portland Corporation had tw

Question

Adjusting Entries for Interest
At December 31, 2014, Portland Corporation had two notes payable outstanding (notes 1 and 2). At December 31, 2015, Portland also had two notes payable outstanding (notes 3 and 4). These notes are described below.

Required

a. Prepare the adjusting entries for interest at December 31, 2014.
b. Assume that the adjusting entries were made at December 31, 2014, and that no adjusting entries were made during 2015. Prepare the 2015 journal entries to record payment of the notes that were outstanding at December 31, 2014.
c. Prepare the adjusting entries for interest at December 31, 2015.
Round answers to nearest dollar. Use 360 days for interest calculations when applicable.

Date of note Principal Amount Interest Rate Number of Days December 31, 2014 Note 1 11/25/2014 $35,000 8% 90 Note 2 12/16/2014 16,800 9 60 December 31, 2015 Note 3 12/11/2015 15,400 9 120 Note 4 12/7/2015 18,000 12 90

Explanation / Answer

Date                Description                                     Debit Credit 31-Dec interest expense 280 interest payable 280 (35000*8%*36/360) 31-Dec interest expense 63 interest payable 63 (16,800*9%*15/360) b) 14-Feb Notes payable 16,800 interest expense 189 interest payable 63 cash 17,052 23-Feb Notes payable 35,000 interest expense 420 interest payable 280 cash 35,700 C) 31-Dec interest expense 77 interest payable 77 (15400*9%*20/360) 31-Dec interest expense 144 interest payable 144 (18000*12%*24/360)

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