Problem No. 4-15 Points Many businesses borrow money during periods of increased

Question

Problem No. 4-15 Points Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Target Corporation is one of America's largest genera merchandise retailers. Each Christmas, Target builds up its inventory to meet the needs o Christmas shoppers. A large portion of Christmas sales are on credit. As a result, Targe often collects cash from the sales several months after Christmas. Assume on November 2015, Target borrowed 6 million cash from Metropolitan Bank and signed a promissiory n that matures in six months. The interest rate was 8.0 percent payable at maturity. The accounting period ends December 31. Required: 1. Give the journal entry to record the note on November 1, 2015 2. Give any adjusting entry required on December 31, 2015. 3. Give the journal entry to record payment of the note and interest on the maturity April 30, 2016, assuming that interest has not been recorded since December 31,2 Debit Credit Nov 01 Cash Notes Payable Dec 31 Interest Expense Interest Payable 2016 Apr 30 Notes Payable Interest Payable Interest Expense Cash

Explanation / Answer

General Journal Debit credit Hint 2015 Nov 01 Cash $        6,000,000 Notes Payable $        6,000,000 Dec 31 Interest Expense $              80,000 (6000000 x 8% x 2/12) Interest Payable $              80,000 2016 Apr 30 Notes Payable $        6,000,000 Interest Payable $              80,000 Interset Expense $            160,000 (6000000 x 8% x 4/12) Cash $        6,240,000

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