Exercise 10-2 On June 1, Merando Company borrows $115,500 from First Bank on a 6
ID: 2550120 • Letter: E
Question
Exercise 10-2
On June 1, Merando Company borrows $115,500 from First Bank on a 6-month, $115,500, 8% note.
(a)
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
Debit
Credit
(b)
Prepare the adjusting entry on June 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
(c)
Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
(d)
What was the total financing cost (interest expense)?
Date
Account Titles and Explanation
Debit
Credit
June 1Explanation / Answer
Journal entries
Date
Particulars
Debit
Credit
A
June 1st
Cash
$115,500
To notes payable a/c
$115,500
(Being cash borrowed for notes recorded)
B
30-Jun
Interest exp ($115,500*8%*1/12)
$770
To interest payable
$770
(Being interest exp recorded)
C
Dec 1st
Notes payable
$115,500
Interest payable ($115,500*8%*6/12)
$4,620
To cash
$120,120
(Being maturity of notes payable recorded)
(D)
Finance cost ($115,500*8%*6/12)
$4,620
Journal entries
Date
Particulars
Debit
Credit
A
June 1st
Cash
$115,500
To notes payable a/c
$115,500
(Being cash borrowed for notes recorded)
B
30-Jun
Interest exp ($115,500*8%*1/12)
$770
To interest payable
$770
(Being interest exp recorded)
C
Dec 1st
Notes payable
$115,500
Interest payable ($115,500*8%*6/12)
$4,620
To cash
$120,120
(Being maturity of notes payable recorded)
(D)
Finance cost ($115,500*8%*6/12)
$4,620
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