just need help with this with a little bit of explanation On December 31, 2013,
ID: 2588366 • Letter: J
Question
just need help with this with a little bit of explanation
On December 31, 2013, State Construction Company signed a $1,000,000 note to Third National Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years.
A) prepare the relevant Journal entry made by Third National Bank to record Note Receivable.
B) prepare the relevant Journal entry by Third National Bank to record interest for the year 12/31/14
C) prepare the relevant Journal entry by Third National Bank to record interest for the year 12/31/15
D) On December 31, 2015 Third National Bank determined that it was probable that the company would pay back only $500,000 of principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,000,000 loan. Determine the loss on impairment that Third National Bank should recognize on December 31, 2015 and record the Journal entry
Explanation / Answer
1. Recording Note Receivable:-
Date:- Dec 31,2013
Note Receivable A/c Dr $1,000,000
To Bank A/c $1,000,000
2. Recording Interest for Dec 31,2014
Bank A/c Dr $100,000
To Interest Income A/c $100,000
(Being Interest Income Recorded and Receivable Standing)
3. Recording Interest for Dec 31,2015
Bank A/c Dr $100,000
To Interest Income A/c $100,000
(Being Interest Income Recorded and Receivable Standing)
4. Recording of Impairment Loss:-
Impairment Loss A/c Dr $500,000
To Note Receivable A/c $500,000
(Being Remaining amount has been booked as loss)
Interest Booking:-
Bank A/c Dr $100,000
To Interest Income A/c $100,000
(Being Interest Income Recorded and Receivable Standing)
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