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31 Dec 2018
On Jun 1, 20X5, Ban Co. borrowed on a $1,440 000 note payable from the Federal Bank. The note bears interest at 11% and is payable in three equal annual principal payments of $480,000. On this date, the bank's prime rate was 12%. The first and second annual payments for interest and principal was made on June 1, 20X6 and June 1, 20X7. At December 31, 20X7, what amount should Ban report as accrued interest payable?
2.
At April 30, Year 1, a $1,500,000 note payable was included in Cab Corp.'s liability account balances. The note is dated May 1, Year 1, bears interest at 14%, and is payable in three equal annual payments of $500,000. The first interest and principal payment was made on May 1, Year 2. In its November 30, Year 2 balance sheet, what amount should Cab report as accrued interest payable for this note?
| On Jun 1, 20X5, Ban Co. borrowed on a $1,440 000 note payable from the Federal Bank. |
| The note bears interest at 11% and is payable in three equal annual principal payments of $480,000. On this date, the bank's prime rate was 12%. The first and second annual payments for interest and principal was made on June 1, 20X6 and June 1, 20X7. |
| At December 31, 20X7, what amount should Ban report as accrued interest payable? |
2.
| At April 30, Year 1, a $1,500,000 note payable was included in Cab Corp.'s liability account balances. The note is dated May 1, Year 1, bears interest at 14%, and is payable in three equal annual payments of $500,000. The first interest and principal payment was made on May 1, Year 2. In its November 30, Year 2 balance sheet, what amount should Cab report as accrued interest payable for this note? |
Reid WolffLv2
1 Jan 2019
Related questions
Entries for Bonds Payable and Installment Note Transactions
The following transactions were completed by Hobson Inc., whosefiscal year is the calendar year:
| 2016 | |
| July 1. | Issued $4,370,000 of five-year, 8% callable bonds dated July 1,2016, at a market (effective) rate of 9%, receiving cash of$4,197,109. Interest is payable semiannually on December 31 andJune 30. |
| Oct. 1. | Borrowed $170,000 as a 10-year, 8% installment note from MarbleBank. The note requires annual payments of $25,335, with the firstpayment occurring on September 30, 2017. |
| Dec. 31. | Accrued $3,400 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment. |
| Dec. 31. | Closed the interest expense account. |
| 2017 | |
| June 30. | Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment. |
| Sept. 30. | Paid the annual payment on the note, which consisted ofinterest of $13,600 and principal of $11,735. |
| Dec. 31. | Accrued $3,165 of interest on the installment note. Theinterest is payable on the date of the next installment notepayment. |
| Dec. 31. | Paid the semiannual interest on the bonds. The bond discountamortization of $17,289 is combined with the semiannual interestpayment. |
| Dec. 31. | Closed the interest expense account. |
| 2018 | |
| June 30. | Recorded the redemption of the bonds, which were called at 98.The balance in the bond discount account is $103,735 after paymentof interest and amortization of discount have been recorded.(Record the redemption only.) |
| Sept. 30. | Paid the second annual payment on the note, which consisted ofinterest of $12,661 and principal of $12,674. |
Required:
1. Journalize the entries to record theforegoing transactions. For compound transactions, if an amount boxdoes not require an entry, leave it blank or enter "0". Whenrequired, round your answers to the nearest dollar.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 2016 | |||
| July 1 | Cash | ||
| Discount on bonds payable | |||
| Bonds payable | |||
| Oct. 1 | Cash | ||
| Notespayable | |||
| Dec. 31-Note | Interest expense | ||
| Notespayable | |||
| Dec. 31-Bond | Cash | ||
| Interest expense | |||
| Gain on bonds payable | |||
| Dec. 31-Closing | Bonds payable | ||
| Discount onbonds payable | |||
| 2017 | |||
| June 30 | Cash | ||
| Discount on bonds payable | |||
| Interest expense | |||
| Sept. 30 | Interest expense | ||
| Notes payable | |||
| Cash | |||
| Dec. 31-Note | |||
| Dec. 31-Bond | Notes payable | ||
| Interest expense | |||
| Cash | |||
| Dec. 31-Closing | Discount on bonds payable | ||
| Bondspayable | |||
| 2018 | |||
| June 30 | Bonds payable | ||
| Cash | |||
| Gain on redemption of bonds | |||
| Sept. 30 | |||
| Notes payable | |||
2. Indicate the amount of the interest expensein (a) 2016 and (b) 2017.
a. 2016 $
b. 2017 $
3. Determine the carrying amount of the bondsas of December 31, 2017.
$
