Question
In: Accounting
Analyzing and Computing Financial Statement Effects of Loan Interest Huddart Company gave a creditor a 90-day,...
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 |
Solutions
Expert Solution
- All working forms part of the answer
- Requirement ‘a’
--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 |
- Requirement ‘b’
|
Interest Payable |
|||
|
$ 24.00 |
|||
|
Interest Expense |
|||
|
$ 24.00 |
|||
- Requirement ‘c’
|
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) |
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