Question

Chance Corporation established a $500,000 credit line on May 1, 2018. The interest rate is 8% and the terms require that interest be paid on the last date of every month. The company borrowed $10,000 on

July 1, and 20,000 on Sept 1. The company repaid $25,000 on October 1. Make all necessary journal entries for 5/1-10/31/18.

Answer 1

Journal entry :

Date	account and explanation	debit	credit
5/1	No entry
7/1	Cash	10000
	Loan payable		10000
	(To record amount borrowed)
7/31	Interest expense (10000*8%*1/12)	67
	Cash		67
	(To record interest paid)
8/31	Interest expense	67
	Cash		67
	(To record interest paid)
9/1	Cash	20000
	Loan payable		20000
	(To record amount borrowed)
9/30	Interest expense (30000*8%*1/12)	200
	Cash		200
	(To record interest paid)
10/1	Loan payable	25000
	Cash		25000
	(To record amount repaid)
10/31	Interest expense (5000*8%*1/12)	33
	Cash		33
	(To record interest paid)