Exercise 11-2 On June 1, Merando Company borrows $127,500 from First Bank on a 6

Question

Exercise 11-2 On June 1, Merando Company borrows $127,500 from First Bank on a 6-month, $127,500, 896 note. Prepare the entry on June 1. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Date Account Titles and Explanation Credit June 1 SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the adjusting entry on June 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit June 30 SHOW LIST OF ACCOUNTS LINK TO TEXT

Explanation / Answer

Merando Company Date Particular Amount(DR) Amount (CR) 1st June Cash $    127,500.00    To Note Payable $         127,500.00 (Being amount borrowed from first bank against 8% note) 30th june Interest Expense=($127500*8%(1/12) $             850.00    To Interest Payable $                  850.00 (Being amount of interest payable on note @8% for one month) 1st Dec Note Payable $    127,500.00 Interest Payable $         5,100.00     To Cash $         132,600.00 (Being amount paid at the time of maturity=(Amount of note payable +6 months interest)=($127500+$850*6) Total Financing Cost=6 months Interest Total Financing Cost=($850*6) $         5,100.00

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