In: Accounting
Analyzing and Computing Financial Statement Effects of Loan Interest
Huddart Company gave a creditor a 90-day, 8% note payable for $7,200 on December 16.
a. Prepare the journal entry to record the year-end December 31st accounting adjustment Huddart must make.
Description | Debit | Credit |
---|---|---|
AnswerInterest expenseInterest payable | Answer | Answer |
AnswerInterest expenseInterest payable | Answer | Answer |
b. Post the journal entries from part a to their respective T-accounts.
Interest Payable | |||
---|---|---|---|
Answer | Answer |
Interest Expense | |||
---|---|---|---|
Answer | Answer |
c. Record the transaction from part a in the financial statement effects template.
Transaction | Cash Asset | + | Noncash Assets | = | Liabilities | + | Contr. Captial | + | Earned Capital | Revenue | - | Expenses | = | Net income | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
To record year-end adjustment. | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer |
--Interest needs to be calculated from 16 Dec to 31 Dec = 15 days.
--No. of days in a year taken = 360 days.
--Interest expense = 7200 x 8% x 15/360 = $ 24
Description |
Debit |
Credit |
Interest expense |
$ 24.00 |
|
Interest payable |
$ 24.00 |
Interest Payable |
|||
$ 24.00 |
|||
Interest Expense |
|||
$ 24.00 |
Transaction |
Cash Asset |
+ |
Noncash Assets |
= |
Liabilities |
+ |
Contr. Captial |
+ |
Earned Capital |
Revenue |
- |
Expenses |
= |
Net income |
|
To record year-end adjustment. |
$ - |
$ - |
$ 24.00 |
$ - |
$ (24.00) |
$ - |
$ 24.00 |
$ (24.00) |