Question

PLEASE USE CHARTS I PROVIDED!

Bennett Enterprises issues a $600,000, 90-day, 4% note to Spectrum Industries for merchandise inventory.

A.

Journalize Bennett Enterprises’ entries to record (refer to the company’s Chart of Accounts for exact wording of account titles):

1.	the issuance of the note on January 1.
2.	the payment of the note at maturity on April 1. Assume a 360-day year and round amounts to the nearest whole dollar.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

B. Journalize Spectrum Industries’ entries to record (refer to the company’s Chart of Accounts for exact wording of account titles):

1.	the receipt of the note on January 1.
2.	the receipt of the payment of the note at maturity on April 1. Assume a 360-day year and round amounts to the nearest whole dollar.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

Answer 1

Answer to Part A:

Date	Description	Debit	Credit	Assets	Liabilities	Equity
Jan 1	Accounts Payable Dr.	600,000			-600,000
	To Notes Payable		600,000		+600,000
Apr 1	Interest Expense Dr.	*6,000				-6,000
	Notes Payable Dr.	600,000			-600,000
	To Cash		606,000	-606,000

*600,000 * 4% * 90/360 = $ 6,000

Answer to Part B

Date	Description	Debit	Credit	Assets	Liabilities	Equity
Jan 1	Note Receivable Dr.	600,000		+600,000
	To Accounts Receivable		600,000	-600,000
Apr 1	Cash Dr.	606,000		606,000
	To Interest Income		6,000			6,000
	To Note receivable		600,000	-600,000

Note: In case you are required to show increase or decrease in accounting equation , then positive value means increase and negative value means decrease.