Question

On June 1, Pharoah Company Ltd. borrows $60,000 from Acme Bank on a 6-month, $60,000, 6% note. The note matures on December 1.

Prepare the entry on June 1. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
June 1	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

  

  

Prepare the adjusting entry on June 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
June 30	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

  

  

Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 1	enter an account title to record the transaction on December 1	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 1	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 1	enter a debit amount	enter a credit amount

  

  

What was the total financing cost (interest expense)?

Total interest expense

$enter the total interest expense

Answer 1

Date	Accounts Titles and Explanations	Debit	Credit
June 1	Cash	$ 60,000
	Notes payable		$ 60,000
	(To record the borrowing of Note)
June 30	Interest expense     ( $ 60,000 x 6% x 1/12)	$ 300
	Interest payable		$ 300
	(To record interest expense for June)
Dec. 1	Notes payable	$ 60,000
	Interest payable       ( $ 60,000 x 6% x 6/12)	$ 1,800
	Cash		$ 61,800
	(To record payment of Note )
	Total financing cost    = Note Amount x rate x Period	$ 60,000 x 6% x 6/12	$ 1,800