31. On June 1, Babar Corporation borrows $40,000 form the bank by signing a 2-mo

Question

31. On June 1, Babar Corporation borrows $40,000 form the bank by signing a 2-month, 4.5%, bank loan. Interest is due at the beginning of each month, commencing July 1. Babar Corporation has a year-end at June 30th The journal entries for June 1st, June 30th, July 1st and August 1st would be: Debit Credit 40,000 Jun-01 Cash Bank Loan Payable 40,000 Jun-30 Interest expense 150 Interest payable 150 Jul-01 Interest payable 150 Cash Bank loan payable Cash 150 Aug-01 40,000 150 Interest expense 40,150

Explanation / Answer

JOURNAL ENTRY Date Account Title Debit Credit JUNE01 Cash $40,000 Bank Loan Payable $40,000 (To record 4.5%bank loan for 2 month) JUNE 30 Interest Expense $        150 (40000*0.045*(1/12)) Interest Payable $        150 (To record interest expense for June) JULY 01 Interest Payable $        150 Cash $        150 (Torecord payment of interest) AUGUST01 Bank Loan Payable $40,000 Interest Expense $        150 Cash $ 40,150 (To record payment of interest and Principal) ANSWER:( a)

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