334 points Many businesses borow money duing periods of increased business activ

Question

334 points Many businesses borow money duing periods of increased business activity to finance inventory and ccounts ecevable. Target Corporation is one of America's Christmas, Target buikds Christmas sales are on credit. As a resut, Target oten coects cash fhom the sales sever Christmas. Assume that on November 1, 2015, Target bonowed S6 milior and signed a promissory note hat matures in sx months. The interest rae was 8.0 percent maturty. The accounting period ends December 31 up its inventory to meet the needs of Christmas shoppers. A large portion ef 1. indicate the accounts, amounts, and ofects of the (a) issuance of the mote on November 1 heacocura munts, ard efi cts ofthe(a)issuance of the note on Novereer 1:0 mpact of of the note and interest on Apeil 30 not round intermediate calculations. Enter your answers in on the accounting equation. (Do dollars. Enter any decreases to a account balances with a minus sign) 5 Cash Note Paryable Interest Payable Interest Payable December 31, 2015 Aperi 30, 2016 Cash hitenest Payable

Explanation / Answer

Date Assets amt $    = Liabilities Amt $ +   Equity Amt   Nov 1 2015. Cash        6,000,000    = Note Payable       6,000,000 Dec 31.2015. Interest Payable               80,000 +   Retained Earning             (80,000) (interest expense) April 30.2016. Cash       (6,240,000)    = Note Payable     (6,000,000) +   Retained Earning           (160,000) Interest Payable             (80,000) +

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