Many businesses borrow money during periods of increased business activity to fi

Question

Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Target Corporation is one of America's largest general merchandise retailers. Each Christmas, Target builds up its inventory to meet the needs of Christmas shoppers. A large portion of Christmas sales are on credit. As a result, Target often collects cash from the sales several months after Christmas. Assume that on November 1, 2015, Target borrowed S6.1 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 8.50 percent payable at maturity. The accounting period ends December 31 Required: 1,283. Complete the required journal entries to record the note on November 1, 2015, interest on the maturity date, April 30, 2016, assuming that interest has not been recorded since December 31 2015. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the borrowing of $6,100,000 Note: Enter debits before credits. Date General Journal Debit Credit November 01, 2015 Record entry Clear entry View general journal

Explanation / Answer

Q1. Jounal entries: Date Accounts title and explanations Debit $ Credit $ 1-Nov Cash Account Dr. 6,100,000      Notes payable 6,100,000 31-Dec Interest expense Dr. 86417      Interest payable (6100,000*8.5%*2/12) 86417 30-Apr Notes payable Dr. 6100000 Interest expense Dr. 172833 Interest payable 86417        Cash Account 6359250 Q2. Date Accounts title and explanations Debit $ Credit $ 1-Jan Cash Account Dr. 120,000       Bonds payable 120,000 31-Dec Interest expense Dr. 7200      Cash account (120,000*6%) 7200 1-Jan Bonds payable Dr. 120000 Loss on retirement of bonds 7200         Cash Account 127200

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