Bank of Albany loaned Berkner Paint Company $1.650,000 on May 1, 20X0. The loan

Question

Bank of Albany loaned Berkner Paint Company $1.650,000 on May 1, 20X0. The loan plus interest of 8% is payable on May 1, 20X1. Requirements 1. Using the balance sheet equation format, prepare an analysis of the impact of the transaction on both Bank of Albany's and Berkner's financial position on May 1, 20X0. Show the summary adjustments on December 31, 2. Prepare adjusting joumal entries for Bank of Albany and Berkn on December 31, 20x0. 3. Prepare 20x0, for the period May 1 to December 31. Prepare an analysis of the transaction that takes place on May 1, 20X1, when Berkner repays its obligation. ntries that Bank of Albany and Berkner would make on May 1, 20X1 when the loan and interest is repaid. These entries should include interest that accumulates between January 1, 20X1 and May 1, 20X1

Explanation / Answer

1. Assets = Liabilities + Stockholders' Equity.

Bank of Albany:

Berkner Paint Company:

2. In the books of Bank of Albany:

In the books of Berkner Paint Company:

3. In the books of Bank of Albany:

In the books of Berkner Paint Company:

Date Assets Liabilities + Stockholders' Equity Cash Note Receivable May 1, 20X0 - $ 1,650,000 + $ 1,650,000 0 0 May 1, 2001 + $ 1,782,000 - $ 1,650,000 0 + 132,000

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