On June 1, Chetney Company Ltd. borrows $78,000 from First Bank on a 6-month, $7
ID: 2370833 • Letter: O
Question
On June 1, Chetney Company Ltd. borrows $78,000 from First Bank on a 6-month, $78,000, 8% note. The note matures on December 1.
(a) Prepare the entry on June 1. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(b) Prepare the adjusting entry on June 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(c) Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(d) What was the total financing cost (interest expense)?
Explanation / Answer
June 01
Debit Bank 78000
Credit 8 % Loan Notes 78000
June 30th
Debit Interest Expense 1040
Credit : Cash/ Bank 1040
July 30th
Debit Interest Expense 1040
Credit : Cash/ Bank 1040
August 30th
Debit Interest Expense 1040
Credit : Cash/ Bank 1040
September 30th
Debit Interest Expense 1040
Credit : Cash/ Bank 6240
October 30th
Debit Interest Expense 1040
Credit : Cash/ Bank 1040
November 30th
Debit Interest Expense 1040
Credit : Cash/ Bank 1040
If the Loan Notes redeemed at Par Value
December 01st
Debit 8 % Loan Notes 71760
Debit Finaance Cost 6240
Credit Bank / Cash 78000
Total financing cost (interest expense) is 6240/-
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