Nicole thinks that her business, Nicole’s Getaway Spa (NGS), is doing really wel

Question

Nicole thinks that her business, Nicole’s Getaway Spa (NGS), is doing really well and she is planning a large expansion. With such a large expansion, Nicole will need to finance some of it using debt. She signed a one-year note payable with the bank for $57,000 with a 6 percent interest rate. The note was issued October 1, 2014; interest is payable semiannually; and the end of Nicole’s accounting period is December 31.

Prepare the journal entries required from the issuance of the note until its maturity on September 30, 2015, assuming that no entries are made other than at the end of the accounting period, when interest is payable, and when the note reaches its maturity. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Oct 1, 2014      Record the borrowing of $57,000

Dec. 31, 2014   Record the accrued interest on December 31, 2014.

March 31, 2015 Record the interest payment on March 31, 2015, assuming no interest accrual has been recorded since December 31, 2014.

Sept. 30, 2015 Record the interest payment on September 30, 2015, assuming no interest accrual has been recorded since the payment on March 31, 2015.

Sept. 30, 2015 Record the repayment of the note on its maturity date.

Prepare the journal entries required from the issuance of the note until its maturity on September 30, 2015, assuming that no entries are made other than at the end of the accounting period, when interest is payable, and when the note reaches its maturity. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Explanation / Answer

Nicole JOURNAL Date Account Tiltles and Explanation Debit ($) Credit ($) Oct 1, 2014 Cash a/c …………………………………………Dr           57,000                              To Notes payable a/c 57000 (6% note payable taken) Dec 31, 2014 Interest expenses a/c ………………..Dr (57,000*6%*3/12)                 855                              To Accrued Interest a/c                 855 (accrued interest for 3 months) Mar 31 2015 Interest expenses a/c ………………..Dr (57,000*6%*3/12)                 855 Accrued Interest a/c ………………….Dr                 855                          To Cash             1,710 (Interest paid for the period Oct-14 to Mar-15) Sep 30 2015 Interest expenses a/c ………………..Dr (57,000*6%*6/12)             1,710                          To Cash             1,710 (Interest paid for the period Apr-15 to Sep-15) Sep 30 2015 Notes payable a/c ……………………………Dr           57,000                      To Cash           57,000 (Repayment of Note payable)

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