26) a) On July 1, 2009, Prism, Inc., borrowed $30,000 from FirstBank on a one ye

Question

26) a) On July 1, 2009, Prism, Inc., borrowed $30,000 from FirstBank on a one year, 10% note payable. Interest is payable onJune 30, 2010, the due date of the note. Their accounting year endsDecember 31, 2009. The journal entry required on the company'sbooks to record the interest paid on December 31, 2009, wouldinclude a debit to interest expense of? b) On January 2, 2009, Hill Company borrowed $10,000 from BankThree. The loan was to be repaid in equal principal installments of$2,000, payable on December 31 of each year, beginning on December31, 2009. Disregarding interest, the amount of the $10,000 loanthat should be considered a current liability on the company's 2009year-end balance sheet would be ? 26) a) On July 1, 2009, Prism, Inc., borrowed $30,000 from FirstBank on a one year, 10% note payable. Interest is payable onJune 30, 2010, the due date of the note. Their accounting year endsDecember 31, 2009. The journal entry required on the company'sbooks to record the interest paid on December 31, 2009, wouldinclude a debit to interest expense of? b) On January 2, 2009, Hill Company borrowed $10,000 from BankThree. The loan was to be repaid in equal principal installments of$2,000, payable on December 31 of each year, beginning on December31, 2009. Disregarding interest, the amount of the $10,000 loanthat should be considered a current liability on the company's 2009year-end balance sheet would be ?

Explanation / Answer

a) 30000*.10=$3000.........so 3000 dollars will be payablealong with the principal on june 30,2010.                  We have to record 1/2 that on Dec 31 2009 because we have had useof loan for 6 months....... :
interestexpense                     1500          (interestor Note) payable              1500 : b) since we paid 2000 dollars on dec 31 2009 we are leftwith : 10000-2000=$8000 as a liability onthe books

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