On March 1, Cooper Company borrows $80,000 from New National Bank by signing a 6

Question

On March 1, Cooper Company borrows $80,000 from New National Bank by signing a 6-month, 6%, interest-bearing note.

Required: Prepare the necessary entries below associated with the note payable on the books of Cooper Company.

(a) Prepare the entry on March 1 when the note was issued.

(b) Prepare any adjusting entries necessary on June 30 in order to prepare the semiannual financial statements. Assume no other interest accrual entries have been made.

(c) Prepare the entry to record payment of the note at maturity.

Explanation / Answer

Ans-

(a) On March 1

Bank a/c Dr $80000

To Note payable a/c $80000

(being borrows $80,000 from New National Bank by signing a 6-month, 6%, interest-bearing note)

b) June 30

Interest expense a/c Dr $2400

To profit & loss a/c $2400

(being interest on note payable $2400(80000*6%*6/12)debited to profit & loss a/c)

Profit & loss a/c Dr $2400

To bank a/c $2400

(being interest on note payable paid)

(C)June 30

Note payable a/c Dr $ 80000

To bank a/c $80000

(being payment of note payable on maturity)

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