Financial Accounting Connect Access Card
Financial Accounting Connect Access Card
5th Edition
ISBN: 9781260159622
Author: J. David Spiceland
Publisher: Mcgraw-Hill
Question
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Chapter 8, Problem 2PA

1. a

To determine

Prepare the journal entry on October1, 2021 for notes payable of Company PC.

1. a

Expert Solution
Check Mark

Answer to Problem 2PA

Prepare the journal entry on October1, 2021 for notes payable of Company PC as follows:

DateAccount Titles and ExplanationDebit ($)Credit ($)
October 1, 2021Cash41,000,000 
 Notes Payable 41,000,000
 (To record the issuance of notes payable)  

Table 1

Explanation of Solution

Note payable:

Note payable denotes a long-term liability that describes the amount borrowed, signed and issued note. The note carries all the details of payable amounts, interest amounts, and maturity dates.

Description:

  • Cash is an asset and it increases the value of asset, so debit it for $41,000,000.
  • Note Payable is a liability and it increases the value of liability, so credit it for $41,000,000.

1. b

To determine

Prepare the journal entry on October1, 2021 for notes receivable of Company M.

1. b

Expert Solution
Check Mark

Answer to Problem 2PA

Prepare the journal entry on October1, 2021 for notes receivable of Company M as follows:

DateAccount Titles and ExplanationDebit ($)Credit ($)
October 1, 2021Notes Receivable41,000,000 
 Cash 41,000,000
 (To record the acceptance of the note receivable)  

Table 2

Explanation of Solution

Notes receivable:

Notes receivable denotes a long-term asset that describes the amount to be received by the company. The note carries all the details of receivable amounts, principal and interest, and maturity dates.

Description:

  • Note Receivable is an asset and it increases the value of asset, so debit it for $41,000,000.
  • Cash is an asset and it decreases the value of asset, so credit it for $41,000,000.

2. a

To determine

Record the adjusting entry on December 31, 2021 for notes payable of Company PC.

2. a

Expert Solution
Check Mark

Answer to Problem 2PA

Record the adjusting entry on December 31, 2021 for notes payable of Company PC as follows:

DateAccount Titles and ExplanationDebit ($)Credit ($)
December 31, 2021Interest Expense922,500 
 Interest Payable (1) 922,500
 (To record the interest accrued, but not paid)  

Table 3

Explanation of Solution

Working Notes:

 Interest Payable = Notes Payable× Interest Percentage × 312= $ 41,000,000 × 9100 × 312= $922,500 (1)

Description:

  • Interest Expense is a component of stockholder’s equity and it decreases the value of stockholder’s equity, so debit interest expense for $922,500.
  • Interest payable is a liability and it increases the value of liability, so credit it for $922,500.

Notes:

In this case, the interest is accrued from October to December (3 months).

2. b

To determine

Record the adjusting entry on December 31, 2021 for notes receivable of Company M.

2. b

Expert Solution
Check Mark

Answer to Problem 2PA

Record the adjusting entry on December 31, 2021 for notes receivable of Company M as follows:

DateAccount Titles and ExplanationDebit ($)Credit ($)
December 31, 2021Interest Receivable (2)922,500 
 Interest Revenue 922,500
 (To record interest earned, but not received)  

Table 4

Explanation of Solution

Working Notes:

 Interest Receivable = Notes Receivable× Interest Percentage × 312= $ 41,000,000 × 100× 312= $922,500 (2)

Description:

  • Interest receivable is an asset and it decreases the value of asset, so debit interest receivable for $922,500.
  • Interest Revenue is a component of stockholder’s equity and it increases the value of stockholder’s equity, so credit interest revenue for $922,500.

Note:

In this case, the interest is accrued from October to December (3 months).

3. a

To determine

Prepare the journal entries on September 30, 2022 for notes payable of Company PC.

3. a

Expert Solution
Check Mark

Answer to Problem 2PA

Prepare the journal entries on September 30, 2022 for notes payable of Company PC as follows:

DateAccount Titles and ExplanationDebit ($)Credit ($)
September 30, 2022Notes Payable41,000,000 
 Interest Expense (3)2,767,500 
 Interest Payable (1)922,500 
 Cash 44,690,000
 ( To record the payment of notes payable and interest)  

Table 5

Explanation of Solution

Working Notes:

 Interest Expense = Principal Amount× Interest Percentage × 912= $ 41,000,000 × 9100 × 912= $ 2,767,500 (3)

Description:

  • Interest Expense is a component of stockholder’s equity and there is a decrease in the value of stockholder’s equity, so debit interest expense for $2,767,500.
  • Interest payable is a liability and it decreases the value of liabilities, so debit it for $922,500.
  • Note Payable is a liability and  it decreases the value of liabilities, so debit it for $41,000,000.
  • Cash is an asset and it decreases the value of assets at the time of maturity, so credit it for $44,690,000.

3. b

To determine

Prepare the journal entries on September 30, 2022 for notes receivable of Company M.

3. b

Expert Solution
Check Mark

Answer to Problem 2PA

Prepare the journal entries on September 30, 2022 for notes receivable of Company M as follows:

DateAccount Titles and ExplanationDebit ($)Credit ($)
September 30, 2022Cash44,690,000 
 Interest Revenue (4) 2,767,500
 Interest Receivable (2) 922,500
 Notes Receivable 41,000,000
 (To record the collection of notes receivable and interest)  

Table 6

Explanation of Solution

Working Notes:

 Interest Revenue = Principal Amount× Interest Percentage × 912= $ 41,000,000 × 9100 × 912= $ 2,767,500 (4)

Description:

  • Cash is an asset and it decreases the value of assets at the time of maturity, so debit it for $44,690,000.
  • Interest Revenue is a component of stockholder’s equity and there is an increase in the value of stockholder’s equity, so credit interest expense for $2,767,500.
  • Interest receivable is asset and it increases the value of asset, so credit it for $922,500.
  • Note receivable is an asset and it increases the value of asset, so credit it for $41,000,000.

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Chapter 8 Solutions

Financial Accounting Connect Access Card

Ch. 8 - Prob. 11SSQCh. 8 - Prob. 12SSQCh. 8 - Prob. 13SSQCh. 8 - Prob. 14SSQCh. 8 - Prob. 15SSQCh. 8 - Prob. 1AECh. 8 - Prob. 2AECh. 8 - Prob. 1RQCh. 8 - Prob. 2RQCh. 8 - Prob. 3RQCh. 8 - Prob. 4RQCh. 8 - Prob. 5RQCh. 8 - Prob. 6RQCh. 8 - Prob. 7RQCh. 8 - Prob. 8RQCh. 8 - Prob. 9RQCh. 8 - Prob. 10RQCh. 8 - Prob. 11RQCh. 8 - Prob. 12RQCh. 8 - Prob. 13RQCh. 8 - Prob. 14RQCh. 8 - Prob. 15RQCh. 8 - Prob. 16RQCh. 8 - Prob. 17RQCh. 8 - Prob. 18RQCh. 8 - Prob. 19RQCh. 8 - Prob. 20RQCh. 8 - Prob. 21RQCh. 8 - Prob. 22RQCh. 8 - Prob. 23RQCh. 8 - Prob. 1BECh. 8 - Prob. 2BECh. 8 - Prob. 3BECh. 8 - BE8-4 On April1, Online Travel issues $13 million...Ch. 8 - Prob. 5BECh. 8 - BE8-6 On December 18, Intel receives $260,000 from...Ch. 8 - Prob. 7BECh. 8 - Prob. 8BECh. 8 - Prob. 9BECh. 8 - Prob. 10BECh. 8 - Prob. 11BECh. 8 - Prob. 12BECh. 8 - Prob. 13BECh. 8 - Prob. 14BECh. 8 - Prob. 15BECh. 8 - Prob. 16BECh. 8 - Prob. 17BECh. 8 - E8-1 Match (by letter) the correct reporting...Ch. 8 - Record notes payable (LO8-2) E8-2 On November 1,...Ch. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - E8-7 Aspen Ski Resorts has 100 employees, each...Ch. 8 - E8-8 During January, Luxury Cruise Lines incurs...Ch. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Record gift card transactions (LO8-4) E8-11 Vail...Ch. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Prob. 14ECh. 8 - Prob. 15ECh. 8 - Prob. 16ECh. 8 - Prob. 17ECh. 8 - Prob. 18ECh. 8 - Prob. 1PACh. 8 - Prob. 2PACh. 8 - Prob. 3PACh. 8 - P8-4A Vacation Destinations offers its employees...Ch. 8 - Prob. 5PACh. 8 - Prob. 6PACh. 8 - Prob. 7PACh. 8 - Prob. 8PACh. 8 - Prob. 9PACh. 8 - P8-1B Listed below are several terms and phrases...Ch. 8 - Prob. 2PBCh. 8 - Prob. 3PBCh. 8 - Prob. 4PBCh. 8 - Prob. 5PBCh. 8 - P8-68 Logan’s Roadhouse opened a new restaurant in...Ch. 8 - Prob. 7PBCh. 8 - Prob. 8PBCh. 8 - Prob. 9PBCh. 8 - Prob. 1APCh. 8 - Prob. 2APCh. 8 - Prob. 3APCh. 8 - Prob. 4APCh. 8 - Ethics AP8-5 Eugene Wright is CFO of Caribbean...Ch. 8 - Prob. 7AP
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