On October 1, 20X4, Farmer Engineering Services purchased a new laser surveying

Question

On October 1, 20X4, Farmer Engineering Services purchased a new laser surveying instrument. Farmer paid $5,000 down and executed the following promissory note:

Promissory note
For value received, the undersigned promises to pay to the order of Laser Equipment Company
the sum of: *******Twenty-Thousand and no/100 Dollars*******     ($20,000)
Along with annual interest of 10% on any unpaid balance.   This note shall mature and be payable, along with accrued interest, on September 30, 20X5.
October 1, 20X4                                              J.D. Farmer   Farmer Engineering
   Issue Date                                                                                                                              Signature

(a) Prepare the appropriate journal entry to record the purchase on October 1, 20X4.
(b) Prepare the appropriate journal entry to record the year-end interest accrual on December 31, 20X4.
(c) Prepare the appropriate journal entry to record the payment of the note and accrued interest on September 30, 20X5.

(a), (b), (c)
GENERAL JOURNAL  
Date Accounts Debit Credit

Explanation / Answer

Date Accounting titles & Explanations Debit Credit 1-Oct Equipment 25,000 cash 5,000 notes payable 20,000 31-Dec interest expense 500 interest payable 500 (20,000*10%*3/12) 30-Sep notes payable 20,000 interest payable 500 interest expense (20000*10%*9/12) 1500 cash 22,000

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