Question

Journalize Bennett Enterprises’ entries to record: the issuance of the note. the payment of the note at maturity. 1. Inventory 540,000 Notes Payable 540,000 2. Notes Payable 540,000 Interest Expense 6,075 Cash 546,075 Feedback b. Journalize Spectrum Industries’ entries to record: the receipt of the note. the receipt of the payment of the note at maturity. 1. Notes Receivable Sales 2. Cash Notes Receivable Interest Revenue

Answer 1

Yes, this is correct

Inventory AC dr             540,000

To notes payable AC CR               540,000

[being inventory has been purchased in obligation to pay via the notes payable]

Yes, this is correct. When we will pay back the notes then our liability will reduce and the interest expenses will be recognized.

Notes payable                  540,000

Interest expenses                6,075

To cash AC CR                                          546,075

[being notes payable are paid back and liability has been reduced]

2.

Notes Receivable AC DR   540,000

To sales AC CR                                         540,000

[being sales has been made against the notes receivables]

Cash AC Dr                    546,075

To Notes Receivable                         540,000

TO Interest revenue AC CR                   6,075

[being cash has been received and notes receivables are not closed]