Logan Company had the following transactions: Apr. 8 Issued a $8,800, 75-day, 8%

Question

Logan Company had the following transactions: Apr. 8 Issued a $8,800, 75-day, 8% note payable in payment of an account with Bennett Company. May 15 Borrowed $40,000, 60-day, 9% note from Lincoln Bank. Jun. 22 Paid Bennett Company the principal and interest due on the April 8 note payable. Jul. 6 Purchased $16,000 of merchandise from Bolton Company; signed a note for 90-day, 10% interest. Jul. 14 Paid the May 15 note due Lincoln Bank. Oct. 2 Borrowed $28,000, 120-day, 12% note from Lincoln Bank. Oct. 4 Defaulted on the note payable to Bolton Company. Required a. Record these transactions in general journal form. b. Record any adjusting entries for interest in general journal form. Logan Company has a December 31 year-end. Round answers to nearest dollar. Use 360 days for interest calculations.

Explanation / Answer

Journal Entries

date

explanation

debit

credit

8-Apr

accounts payable

8800

notes payable

8800

(issued note payable)

15-May

cash

40000

note payable

40000

(borrowed from bank)

22-Jun

notes payable

8800

Interest

(8800*8%*75)/360

146.6667

interest expense

146.6667

cash

8946.667

(payment made)

6-Jul

purchase

16000

notes payable

16000

(goods purchased on credit)

15-Jul

note payable

40000

interest expense

600

Interest

(40000*60*9%)/360

600

cash

40600

(payment made)

2-Oct

cash

28000

notes payable

28000

(borrowed from bank)

4-Oct

notes payable

16000

interest expense

394.5205

Interest

(16000*90*10%)/365

394.5205

accounts payable

16394.52

(default on payment of note)

31-Dec

interest expense

840

interest payable

840

Interest

(28000*90*12%)/360

840

interest due at year end

No of days interest due

29+30+31

120 days

Oct

29

nov

30

December

31

total no of days interest due upto dec 31

90

Journal Entries

date

explanation

debit

credit

8-Apr

accounts payable

8800

notes payable

8800

(issued note payable)

15-May

cash

40000

note payable

40000

(borrowed from bank)

22-Jun

notes payable

8800

Interest

(8800*8%*75)/360

146.6667

interest expense

146.6667

cash

8946.667

(payment made)

6-Jul

purchase

16000

notes payable

16000

(goods purchased on credit)

15-Jul

note payable

40000

interest expense

600

Interest

(40000*60*9%)/360

600

cash

40600

(payment made)

2-Oct

cash

28000

notes payable

28000

(borrowed from bank)

4-Oct

notes payable

16000

interest expense

394.5205

Interest

(16000*90*10%)/365

394.5205

accounts payable

16394.52

(default on payment of note)

31-Dec

interest expense

840

interest payable

840

Interest

(28000*90*12%)/360

840

interest due at year end

No of days interest due

29+30+31

120 days

Oct

29

nov

30

December

31

total no of days interest due upto dec 31

90

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