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6 July, 04:40

Lewis Company had the following transactions involving notes payable.

July 1, 2015 Borrows $50,500 from First National Bank by signing a 9-month, 8% note.

Nov. 1, 2015 Borrows $61,200 from Lyon County State Bank by signing a 3-month, 6% note.

Dec. 31, 2015 Prepares adjusting entries.

Feb. 1, 2016 Pays principal and interest to Lyon County State Bank.

Apr. 1, 2016

Pays principal and interest to First National Bank.

Prepare journal entries for each of the transactions.

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Answers (1)
  1. 6 July, 07:07
    0
    Answer and Explanation:

    The journal entries are shown below

    1. Cash Dr $50,500

    To Note payable $50,500

    (Being the amount borrowed is recorded)

    2. Cash Dr $61,200

    To Note payable $61,200

    (Being the amount borrowed is recorded)

    3. Interest expense $2,020

    To Interest payable $2,020

    (Being the interest expense is recorded)

    The computation is shown below:

    = $50,500 * 8% * 6 months : 12 months

    = $2,020

    4. Interest expense $612

    To Interest payable $612

    (Being the interest expense is recorded)

    The computation is shown below:

    = $61,200 * 6% * 2 months : 12 months

    = $612

    5. Note payable $61,200

    Interest expense $306

    Interest payable $612

    To Cash $62,118 ($61,200 + $918)

    (Being the principal and the interest is recorded)

    = $61,200 * 6% * 3 months : 12 months

    = $2,020

    5. Note payable $50,500

    Interest expense $1,010

    Interest payable $2,020

    To Cash $62,118 ($50,500 + $3,030)

    (Being the principal and the interest is recorded)

    = $50,500 * 8% * 9 months : 12 months

    = $3,030
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