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Example Homework Quiz&acirc;€”Day 2

# Example Homework Quiz&acirc;€”Day 2 - Example...

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Example Homework Quiz—Day 2 Solutions 1. Glaus Corp. signed a three-month, zero-interest-bearing note on November 1, 2010 for the purchase of \$150,000 of inventory. The face value of the note was \$152,205. Assuming Glaus used a “Discount on Note Payable” account to initially record the note and that the discount will be amortized equally over the 3-month period. 1a. In the table below write the 11/1 journal entry: Inventory 150,000 Discount on N/P 2,205 Notes payable 152,205 1b. In the table below write the 12/31 journal entry: Interest expense (2,205 x 2/3) 1,470 Discount on N/P 1,470 1c. In the table below write the 1/31 journal entry: Interest expense (2,205 x 1/3) 735 Discount on N/P 735 Notes payable 152,205 Cash 152,205 2. On August 31, Jenks Co. partially refunded \$180,000 of its outstanding 10% note payable made one year ago to Arma State Bank by paying \$180,000 plus \$18,000 interest, having obtained the \$198,000 by using \$52,400 cash and signing a new one-year \$160,000 note discounted at 9% by the bank. 2a. In the table below write the 8/31 journal entry: Notes payable 180,000 Interest payable (180,000 x 4/12 x 10%) 6,000

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Example Homework Quiz&acirc;€”Day 2 - Example...

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