Novak Corporation issued a 4-year, $35,000, 4% note to Greenbush Company on Janu
ID: 2562352 • Letter: N
Question
Novak Corporation issued a 4-year, $35,000, 4% note to Greenbush Company on January 1, 2017, and received a computer that normally sells for $27,399. The note requires annual interest payments each December 31. The market rate of interest for a note of similar risk is 11%.
Prepare Novak’s journal entries for (a) the January 1 issuance and (b) the December 31 interest. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Date
Account Titles and Explanation
Debit
Credit
January 1, 2017
December 31, 2017
No.
Date
Account Titles and Explanation
Debit
Credit
(a)January 1, 2017
(b)December 31, 2017
Explanation / Answer
JOURNAL ENTRY :
Note : Discount on notes payable is based on effective interest method
DATE ACCOUNTS & EXPLANATION DEBIT CREDIT 2017 Jan 1 Computer a/c 27399 Discount on notes payable a/c 7601 4% notes payable a/c 35000 (To record issue of notes payable 2017 Dec 31 Interest expenses a/c (27399*11%) 3014 Discount on notes payable a/c 1614 Cash a/c (35000*4%) 1400 (To record interest)Related Questions
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