Adjusting Entries for Interest At December 31, 2011, Portland Corporation had tw

Question

Adjusting Entries for Interest
At December 31, 2011, Portland Corporation had two notes payable outstanding (notes 1 and 2). At December 31, 2012, 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, 2011.
b. Assume that the adjusting entries were made at December 31, 2011, and that no adjusting entries were made during 2012. Prepare the 2012 journal entries to record payment of the notes that were outstanding at December 31, 2011.
c. Prepare the adjusting entries for interest at December 31, 2012.
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, 2011 Note 1 November 25, 2011 $28,000 8% 90 Note 2 December 16, 2011 17,800 9% 60 December 31, 2012 Note 3 December 11, 2012 16,400 9% 120 Note 4 December 07, 2012 19,000 10% 90

Explanation / Answer

a. Prepare the adjusting entries for interest at December 31, 2011.

Interest expenses a/c

(28000*8%*36/360)+(17800*9%*15/360)

b. Assume that the adjusting entries were made at December 31, 2011, and that no adjusting entries were made during 2012. Prepare the 2012 journal entries to record payment of the notes that were outstanding at December 31, 2011.

c. Prepare the adjusting entries for interest at December 31, 2012.

interest expenses a/c

(16400*9%*20/360+19000*10%*24/360)

Date accounts & explanation debit credit 2011 dec 31

Interest expenses a/c

(28000*8%*36/360)+(17800*9%*15/360)

290.75       Interest payable a/c 290.75

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