On June 1, Fancher Company Ltd. borrows $60,000 from First Bank on a 6-month, $6

Question

On June 1, Fancher Company Ltd. borrows $60,000 from First Bank on a 6-month, $60,000, 8% note. The note matures on December 1.

Prepare the adjusting entry on June 30.

Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30.

What was the total financing cost (interest expense)?_______________

Prepare the entry on June 1. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation June 1 Debit Credit

Explanation / Answer

What was the total financing cost (interest expense) is $2,400 (400*6)

Date Account Tiltles and Explanation Debit ($) Credit ($) Jun 1 Cash a/c ………………………………….Dr           60,000                                   To Notes payable a/c           60,000 (Borrow 8% note payable from bank) Date Account Tiltles and Explanation Debit ($) Credit ($) Jun 30 Interest expenses a/c ………………………………….Dr                 400                                   To Accrued interest a/c                 400 (Interest expenses for Jun. 60,000*8%*1/12) Date Account Tiltles and Explanation Debit ($) Credit ($) Dec 1 Notes payable a/c ………………………………….Dr           60,000 Accrued interest a/c …………………………….Dr (400*6) 2400                      To Cash a/c           62,400 (Notes payable repaid with 6 months interest)

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