Question

Chapter 10 -1   

Entries for notes payable

Bennett Enterprises issues a $648,000, 60-day, 6%, note to Spectrum Industries for merchandise inventory.

Assume a 360-day year. If required, round your answers to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. Journalize Bennett Enterprises’ entries to record:

the issuance of the note.

the payment of the note at maturity.

1.

Inventory ________

Notes Payable ______

2.

Notes Payable _____

Interest Expense ______

Cash ______   

b. Journalize Spectrum Industries’ entries to record:

1.the receipt of the note.

2.the receipt of the payment of the note at maturity.

1.	Notes Receivable_____
	Sales _____
2.	Cash _____
	NotesReceivable	____
	InterestRevenue_____

Answer 1

a. Journalize Bennett Enterprises’ entries to record:

No.	accounts & explanation	debit	credit
1.	Inventory	648000
	Notes payable		648000
2	Notes payable	648000
	Interest expense (648000*6%*60/360)	6480
	Cash		654480

b. Journalize Spectrum Industries’ entries to record:

No	Accounts	Debit	credit
1	Notes receivable	648000
	Sales		648000
2	Cash	654480
	Notes receivable		648000
	Interest revenue		6480