10.1 Jenny Kanne and Cindy Travis borrowed $30,600 on a 7-month, 6% note from Go
ID: 2456435 • Letter: 1
Question
10.1
Jenny Kanne and Cindy Travis borrowed $30,600 on a 7-month, 6% note from Golden State Bank to open their business, KT's Coffee House. The money was borrowed on June 1, 2014, and the note matures January 1, 2015. Prepare the entry to record the receipt of the funds from the loan. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Prepare the entry to accrue the interest on June 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Assuming adjusting entries are made at the end of each month, determine the balance in the interest payable account at December 31, 2014. Balance in interest payable account $ Prepare the entry required on January 1, 2015, when the loan is paid back. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)Explanation / Answer
June-1:-
Debit Bank = 30,600
Credit 6% Note from Golden State Bank = 30,600
June-30
Debit Interest (6%of 30,600*1/12) = 153
Credit Interest Payable = 153
Dec-31
Debit Interest[6% of (30,600+153)*6/12] = 923
Credit Interest Payable = 923
Jan-1:-
Debit Interest Payable = 1076
Credit Bank = 1076
Jan-1:-
Debit 6% Note from Golden State Bank = 30,600
Credit Bank = 30,600
Balance in Interest payable a/c on Dec-31 = $1076
June-1:-
Debit Bank = 30,600
Credit 6% Note from Golden State Bank = 30,600
June-30
Debit Interest (6%of 30,600*1/12) = 153
Credit Interest Payable = 153
Dec-31
Debit Interest[6% of (30,600+153)*6/12] = 923
Credit Interest Payable = 923
Jan-1:-
Debit Interest Payable = 1076
Credit Bank = 1076
Jan-1:-
Debit 6% Note from Golden State Bank = 30,600
Credit Bank = 30,600
Balance in Interest payable a/c on Dec-31 = $1076
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