Financial accounting
Financial accounting
3rd Edition
ISBN: 9780077506902
Author: David J Spieceland Wayne Thomas Don Herrmann
Publisher: Mcgraw-Hill
Question
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Chapter 8, Problem 8.2AP

1(a)

To determine

To Prepare: the journal entries on October1, 2015 for notes payable of Company PC.

1(a)

Expert Solution
Check Mark

Answer to Problem 8.2AP

Date Account Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

October 1 Cash 41,000,000  
  Notes Payable   41,000,000
  (To record the issuance of notes payable)    

(Table 1)

Explanation of Solution

Notes payable

Notes Payable is a written promise to pay a certain amount on a future date, with certain percentage of interest. Companies use to issue notes payable to meet short-term financing needs.

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

1(b)

To determine

To Prepare: the journal entries on October1, 2015 for notes receivable of Company M.

1(b)

Expert Solution
Check Mark

Answer to Problem 8.2AP

Date Account Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

October 1 Notes Receivable 41,000,000  
  Cash   41,000,000
  (To record the acceptance of the note receivable)    

(Table 2)

Explanation of Solution

Notes Receivable:

Note receivable refers to a written promise for the amounts to be received within a stipulated period of time. This written promise is issued by a debtor or borrower to lender or creditor. Notes receivable is an asset of a business.

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

2(a)

To determine

To Record: the adjustment entries on December 31, 2015 for notes payable of Company PC.

2(a)

Expert Solution
Check Mark

Answer to Problem 8.2AP

Date Account Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

December 31 Interest Expense (a) 922,500  
  Interest Payable (a)   922,500
  (To record the interest accrued, but not paid)    

(Table 3)

Explanation of Solution

Notes payable

Notes Payable is a written promise to pay a certain amount on a future date, with certain percentage of interest. Companies use to issue notes payable to meet short-term financing needs.

Working Notes:

Interest Payable = Notes Payable× Interest Percentage × 312= $ 41,000,000 × 9% × 312= $922,500 (a)

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

Notes:

In this case there is an accrual of interest from October to December (3 months).

2(b)

To determine

To Record: the adjustment entries on December 31, 2015 for notes receivable of Company M.

2(b)

Expert Solution
Check Mark

Answer to Problem 8.2AP

Date Account Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

December 31 Interest Receivable (b) 922,500  
  Interest Revenue (b)   922,500
  (To record interest earned, but not received)    

(Table 4)

Explanation of Solution

Notes Receivable:

Note receivable refers to a written promise for the amounts to be received within a stipulated period of time. This written promise is issued by a debtor or borrower to lender or creditor. Notes receivable is an asset of a business.

Working Notes:

Interest Receivable = Notes Receivable× Interest Percentage × 312= $ 41,000,000 × 9% × 312= $922,500 (b)

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

Note:

In this case there is an interest accrued from the month of October to December (3 months).

3(a)

To determine

To Prepare: the journal entries on September 30, 2016 for notes payable of Company PC.

3(a)

Expert Solution
Check Mark

Answer to Problem 8.2AP

Date Account Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

September 30 Notes Payable 41,000,000  
  Interest Expense (c) 2,767,500  
  Interest Payable (a) 922,500  
  Cash   44,690,000
  ( To record the payment of notes payable and interest)    

(Table 5)

Explanation of Solution

Notes payable

Notes Payable is a written promise to pay a certain amount on a future date, with certain percentage of interest. Companies use to issue notes payable to meet short-term financing needs.

Working Notes:

Interest Expense = Principal Amount× Interest Percentage × 912= $ 41,000,000 × 9% × 912= $ 2,767,500 (c)

  • Interest Expense for 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 decreased, so debit it for $ 922,500.
  • Note Payable is a liability and decreased, so debit it for $ 41,000,000.
  • Cash is an asset and decreased at the time of maturity, so credit it for $ 44,690,000.

3(b)

To determine

To Prepare: the journal entries on September 30, 2016 for notes receivable of Company M.

3(b)

Expert Solution
Check Mark

Answer to Problem 8.2AP

Date Account Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

September 30 Cash 44,690,000  
  Interest Revenue (d)   2,767,500
  Interest Receivable (b)   922,500
  Notes Receivable   41,000,000
  (To record the collection of notes receivable and interest)    

(Table 6)

Explanation of Solution

Notes Receivable:

Note receivable refers to a written promise for the amounts to be received within a stipulated period of time. This written promise is issued by a debtor or borrower to lender or creditor. Notes receivable is an asset of a business.

Working Notes:

Interest Revenue = Principal Amount× Interest Percentage × 912= $ 41,000,000 × 9% × 912= $ 2,767,500 (d)

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

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Chapter 8 Solutions

Financial accounting

Ch. 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 - Record notes payable (LO82) Flip Side of BE82 On...Ch. 8 - Prob. 8.2BECh. 8 - Record notes receivable (LO82) Flip Side of BE81...Ch. 8 - Determine interest expense (LO82) Record...Ch. 8 - Prob. 8.5BECh. 8 - Record deferred revenues (LO84) On December 18,...Ch. 8 - Prob. 8.7BECh. 8 - Prob. 8.8BECh. 8 - Prob. 8.9BECh. 8 - Prob. 8.10BECh. 8 - Prob. 8.11BECh. 8 - Prob. 8.12BECh. 8 - Prob. 8.13BECh. 8 - Prob. 8.14BECh. 8 - Prob. 8.15BECh. 8 - Determine proper classification of liabilities...Ch. 8 - Prob. 8.2ECh. 8 - Prob. 8.3ECh. 8 - Prob. 8.4ECh. 8 - Determine interest expense (LO82) OS Environmental...Ch. 8 - Record a line of credit (LO82) The following...Ch. 8 - Prob. 8.7ECh. 8 - Record payroll (LO83) During January, Luxury...Ch. 8 - Prob. 8.9ECh. 8 - Prob. 8.10ECh. 8 - Prob. 8.11ECh. 8 - Prob. 8.12ECh. 8 - Prob. 8.13ECh. 8 - Prob. 8.14ECh. 8 - Prob. 8.15ECh. 8 - Prob. 8.16ECh. 8 - Prob. 8.1APCh. 8 - Prob. 8.2APCh. 8 - Prob. 8.3APCh. 8 - Record Payroll (LOS3) Vacation Destinations offers...Ch. 8 - Prob. 8.5APCh. 8 - Prob. 8.6APCh. 8 - Prob. 8.7APCh. 8 - Prob. 8.8APCh. 8 - Prob. 8.9APCh. 8 - Prob. 8.1BPCh. 8 - Prob. 8.2BPCh. 8 - Prob. 8.3BPCh. 8 - Record Emily Turnbull, president of Aerobic...Ch. 8 - Prob. 8.5BPCh. 8 - Prob. 8.6BPCh. 8 - Prob. 8.7BPCh. 8 - Prob. 8.8BPCh. 8 - Prob. 8.9BPCh. 8 - Great AdventuresContinuing Problem (This is a...Ch. 8 - Prob. 8.2APFACh. 8 - Prob. 8.3APFACh. 8 - Prob. 8.4APCACh. 8 - Prob. 8.5APECh. 8 - Prob. 8.7APWCCh. 8 - AP8–8 Quattro Technologies, a hydraulic...
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