Bennett Enterprises issues a $550,000, 45-day, 4% note to Spectrum Industries fo
ID: 2575570 • Letter: B
Question
Bennett Enterprises issues a $550,000, 45-day, 4% note to Spectrum Industries for merchandise inventory. Required: A. Journalize Bennett Enterprises’ entries to record (refer to the company’s Chart of Accounts for exact wording of account titles): 1. the issuance of the note. 2. the payment of the note at maturity. Assume a 360-day year. B. Journalize Spectrum Industries’ entries to record (refer to the company’s Chart of Accounts for exact wording of account titles): 1. the receipt of the note. 2. the receipt of the payment of the note at maturity. Assume a 360-day year.
the payment of the note at maturity on February 15. Assume a 360-day year and round amounts to the nearest whole dollar.
A. Journalize Bennett Enterprises’ entries to record (refer to the company’s Chart of Accounts for exact wording of account titles): 1. the issuance of the note on January 1. 2.the payment of the note at maturity on February 15. Assume a 360-day year and round amounts to the nearest whole dollar.
Instructions Bennett Enterprises issues a $550,000, 45-day, 496 note to Spectrum Industries for merchandise inventory. Required: A. Journalize Bennett Enterprises' entries to record (refer to the company's Chart of Accounts for exact wording of account titles) 1. the issuance of the note. 2. the payment of the note at maturity. Assume a 360-day year B. Journalize Spectrum Industries' entries to record (refer to the company's Chart of Accounts for exact wording of account titles) 1. the receipt of the note. 2. the receipt of the payment of the note at maturity. Assume a 360-day year.
Explanation / Answer
Answer
Note = $ 550000 at 4% for 45 days
Annual Interest = 550000 x 4% = $22000
Interest for 45 days = 22000 x (45 days/360 days) = $2750
Journal
Accounting Equation
Date
Description
Debit
Credit
Assets
Liabilities
Equity
1
01-Jan
Inventory
550000
550000
2
Notes payable
550000
550000
3
15-Feb
Notes payable
550000
-550000
4
Interest Expense
2750
-2750
5
Cash
552750
-552750
Journal
Accounting Equation
Date
Description
Debit
Credit
Assets
Liabilities
Equity
1
01-Jan
Accounts receivables
550000
550000
2
Sales
550000
550000
3
15-Feb
Cash
552750
552750
4
Interest Revenue
2750
2750
5
Accounts receivables
550000
-550000
Journal
Accounting Equation
Date
Description
Debit
Credit
Assets
Liabilities
Equity
1
01-Jan
Inventory
550000
550000
2
Notes payable
550000
550000
3
15-Feb
Notes payable
550000
-550000
4
Interest Expense
2750
-2750
5
Cash
552750
-552750
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