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Chapter 13: Question 3BE (page 692)

BE13-3 (L01) Takemoto Corporation borrowed \(60,000 on November 1, 2017, by signing a \)61,350, 3-month, zero-interest bearing note. Prepare Takemoto鈥檚 November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry.

Short Answer

Expert verified

The amount of discount on notes payable is $1,350.

Step by step solution

01

Meaning of Notes Payable

Notes payable is a negotiable instrument. It is used by borrowers to borrow money by promising the lender to pay the borrowed amount on a specific date. The nature of notes payable as a current liability or non-current liability depends on the maturity period.

02

Journal Entries

Date

Accounts and Explanation

Debit $

Credit $

November 1, 2017

Cash

$60,000

Discount on Notes Payable

$1,350

Notes Payable

$61,350

December 31, 2017

Interest Expenses

$900

Discount on Notes Payable ($1,350 x 2/3)

$900

February 1, 2018

Interest expenses

$450

Discount on Notes Payable

$450

February 1, 2018

Notes Payable

$61,350

Cash

$61,350

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Most popular questions from this chapter

(Fair Value Measurement) Presented below is information related to the purchases of common stock by Lilly

Company during 2017.

Cost Fair Value

(at purchase date) (at December 31)

Investment in Arroyo Company stock \(100,000 \) 80,000

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Total \(530,000 \)570,000

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(Assume a zero balance for any Fair Value Adjustment account.)

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C 23,000 25,500 2,500

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On January 20, 2018, Steffi Graf, Inc. sold security A for $15,100. The sale proceeds are net of brokerage fees.

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(a) Prepare the adjusting entry at December 31, 2017, to report the portfolio at fair value.

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Amount \(

Amount \)

Amount \(

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Receivables

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Less: Allowance

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\(488,000

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(5) Profit margin on sales.

(6) Return on assets on December 31, 2017.

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(1) Write off an uncollectible account receivable, \(2,200.

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(4) Collect $23,000 on accounts receivable.

(5) Buy equipment on account.

(6) Give an existing creditor a short-term note in settlement of account.
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