PROBLEM 4: ACCOUNTING FOR CURRENT LIABILITIRS. (14 POINTS TOTAL) Cards & Gifts I

Question

PROBLEM 4: ACCOUNTING FOR CURRENT LIABILITIRS. (14 POINTS TOTAL) Cards & Gifts Ine, had the following transaction during 20x2 April 1, 20x2, borrowed $100,000 Erom 2nd National Bank of Shippensburg signed a 12 month, 10% promissory note. Prepare the journal entry to record the April & Gifts Inc. (3 POINTS) tranaction by Cards 2. Prepare the adjusting journal entry for the year anded December 31, 20x2. (3 POINTS) 3. Prepare the journal entry needed on April 1, 20x3, to record repayment of the note to the 2nd National Bank of Shippenaburg. (8 POINTS)

Explanation / Answer

Date Accounts Titles & Explanation Debit ($) Credit ($) (1) April 1 , 20X2 Cash 100,000 Notes Payable 100,000 (To record loan from National bnk of Shippensburg through signing promissory note) (2) Dec 31 , 20X2 Interest Expense ($100,000 * 10 % * 9 /12) 7,500 Interest Payable 7,500 (To record accured interest on promissory note at year end) (3) April 1 , 20X3 Notes Payable 100,000 Interest Payable 7,500 Interest Expense ($100,000 * 10 % * 3/12) 2,500 Cash 110,000 (To record repayment of note along with interest)

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