Question

# Kelly Jones and Tami Crawford borrowed \$46,500 on a 7-month, 4% note from Gem State Bank...

Kelly Jones and Tami Crawford borrowed \$46,500 on a 7-month, 4% note from Gem State Bank to open their business, JC’s Coffee House. The money was borrowed on June 1, 2017, and the note matures January 1, 2018.

Prepare the entry to record the receipt of the funds from the loan.

Prepare the entry to accrue the interest on June 30.

Assuming adjusting entries are made at the end of each month, determine the balance in the interest payable account at December 31, 2017.

Prepare the entry required on January 1, 2018, when the loan is paid back.

 Date Title Debit Credit June 1, 2017 Cash \$ 46,500 Note payable \$ 46,500 (To record borrowings) June 30, 2017 Interest expenses (\$46,500*4%*1/12) \$        155 Interest payable \$        155 (To record interest accrued for the month)

Interest payable on 31 December 2017 = \$46,500*4%*7/12 = \$1,085

 Jan 1, 2018 Note payable \$ 46,500 Interest payable \$    1,085 Cash \$ 47,585 (To record repayment of note with interest)

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