Question

On June 1, 2019, ABC Company signed a $25,000, 120-day, 6% note payable to cover a past due account payable.

a. What is the total amount of interest to be paid on this note?

b. Prepare ABC Company's general journal entry to record the issuance of the note payable

c. Prepare ABC Company's general journal entry to record the payment of the note on

September 29, 2019 (2.5 marks).

What are the characteristics of corporations (2.5 mark).

On July 31, a company declared a cash dividend of $0.25 per common share to the shareholders of record on August 15. The cash dividend will be paid on August 25. This company has 500,000 shares authorized and 100,000 shares outstanding. Prepare the journal entries required on July 31, August 15 and August 25 (2.5 Marks).

Answer 1

Answer 1

"a"

assumption: considering 360 days in a year for easy calculations

amount of interest = note amount * percentage rate * number of days / 360 days

= 25000 * 6% * 120/360

= 500

"b"

Journal Entry	Debit	Credit
Cash a/c	25000
To Note payable		25000

"c"

Journal Entry	Debit	Credit
Note payable a/c	25000
Interest expense a/c	500
To Cash a/c		25500

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