Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 10 - Reporting and Analyzing Liabilities - Exercises: E10-2

Answer

Step1: Interest due on maturity 400 dollars Rate of Interest 8% Period of Note payable - 4 months 400 = Amount x 8% x (4/12) Amount = 15,000 dollars Step2: Amount = 18,500 dollars Interest = 555 dollars Period = 4 months 555 = 18,500 x Interest rate x 4 months Interest rate = 9% Step3: May 15 Cash 15,000 dollars Notes payable 15,000 dollars (a) Sept. 15 Notes payable 15,000 dollars Interest expenses 400 dollars Cash 15,400 dollars (b)

Work Step by Step

Interest = Amount x Interest rate X period in years Step2: Interest = Amount x Interest ratex period in years Step3: a)To record the issue of Notes payable for 4 months b)To record the repayment of Notes payable along with the interest due
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