Question

7. On December 1, 2017, Goliath Corporation borrowed $120,000 on a three month, 10% interest on the note. Goliath Corporation's year end is December 31. (2 points)

Required:

1. Prepare the journal entries to record the amount borrowed and the interested due later in 2017 and 2018 for Goliath Corporation. Omit explanations.

2. At December 31, 2017, what is reported on the balance sheet?

Answer 1

• All working forms part of the answer
• Requirement 1

Date	Accounts title	Debit	Credit
01-Dec-17	Cash	$          120,000.00
	Notes Payable		$        120,000.00
	(Amount borrowed as 3 months Notes)
31-Dec-17	Interest Expense [120000 x 10% x 1/12]	$              1,000.00
	Interest Payable		$             1,000.00
	(1 month interest expense accrued on Notes)
01-Mar-18	Notes Payable	$          120,000.00
	Interest Expense [120000 x 10% x 2/12]	$              2,000.00
	Interest Payable (Credited earlier)	$              1,000.00
	Cash [120000 x 10% x 3/12]		$        123,000.00
	(Cash paid on Maturity of 3 months)

• Requirement 2

Balance Sheet (Partial) - at 31 Dec, 2017
Liabilities
Current Liabilities:
Interest Payable	$              1,000.00
Notes Payable (Short Term)	$          120,000.00