E10-2 Recording a Note Payable through Its Time to Maturity [LO 10-2] Many busin
ID: 2587067 • Letter: E
Question
E10-2 Recording a Note Payable through Its Time to Maturity [LO 10-2] Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Target Corporation is one of America's largest general merchandise retailers. Each Christmas, Target builds up its inventory to meet the needs of Christmas shoppers. A large portion of Christmas sales are on credit. As a result, Target often collects cash from the sales several months after Christmas. Assume that on November 1, 2015, Target borrowed $6.4 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 10.00 percent payable at maturity. The accounting period ends December 31 Required 1,2&3. Complete the required journal entries to record the note on November 1, 2015, interest on the maturity date, April 30, 2016, assuming that interest has not been recorded since December 31, 2015. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 2 Record the borrowing of $6,400,000 Note: Enter debits before credits Date General Journal Debit Credit November 01, 2015 Record entry Clear entry View general journalExplanation / Answer
Date
Accounts Title
Debit
Credit
November 1
Cash
6400000
Note payable
6400000
Borrowed on 6 month, 7% Note Payable
2.
Date
Accounts Title
Debit
Credit
December 31(end of the accounting period)
Interest Expense
106667
Interest Payable
106667
Explanation: 6400000 x 10% x 2/12
3.
Date
Accounts Title
Debit
Credit
Note Payable
6400000
Interest Payable
106667
Interest Expense
213333
Cash
6720000
Paid note plus interest at
Explanation: 6400000 x 10% x 4/12
Date
Accounts Title
Debit
Credit
November 1
Cash
6400000
Note payable
6400000
Borrowed on 6 month, 7% Note Payable
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