Question

3. Greener Pastures Corporation borrowed $2,000,000 on November 1, 2018. The note carried a 12 percent interest rate with the principal and interest payable on June 1, 2019.

1. (a) The note issued on November 1.

2. (b) The interest accrual on December 31.

3. Indicate the effects of the amounts for the above transactions. (Enter any decreases to assets, liabilities, or stockholders equity with a minus sign. Do not round intermediate calculations.)

5. Barton Chocolates used a promissory note to borrow $1,850,000 on July 1, 2018, at an annual interest rate of 6 percent. The note is to be repaid in yearly installments of $370,000, plus accrued interest, on June 30 of every year until the note is paid in full (on June 30, 2023). Show how the results of this transaction would be reported in a classified balance sheet prepared as of December 31, 2018. (Do not round intermediate calculations.)

BARTON CHOCOLATES
Balance Sheet (partial)
As of December 31, 2018
Current Liabilities
Interest Payable	$55,500
Current Portion of Long-term Debt	370,000
Other Noncurrent Liabilities
	$425,500
Notes Payable (long-term)	1,480,000

Answer 1

Answer:

	Debit	Credit
November 01,2018	Cash	2,000,000
	Notes payable		2,000,000
December 31,2018	Interest expense	40,000		=2,000,000*12%*2/12
	Interest payable		40,000

Balance Sheet as at Deecember 13 2018
Current liabilities
Outstanding interest	$55,500
Current part of long term debt	$370,000
Non current liability	$425,000
Notes payable	$1,480,000

Working Notes:

Outstanding interest = $1850000 x 6/100 x 6/12 = $55500