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Required information Problem 8-2B Record notes payable and notes receivable (LO8-2) Skip to question [The following...

Required information Problem 8-2B Record notes payable and notes receivable (LO8-2) Skip to question [The following information applies to the questions displayed below.] Eskimo Joe’s, designer of the world’s second best-selling T-shirt (just behind Hard Rock Cafe), borrows $21 million cash on November 1, 2021. Eskimo Joe’s signs a six-month, 7% promissory note to Stillwater National Bank under a prearranged short-term line of credit. Interest on the note is payable at maturity. Each firm has a December 31 year-end.

2. Record the adjustments on December 31, 2021, for (a) Eskimo Joe's and (b) Stillwater National Bank

urnal entry worksheet

  • Record the adjusting entry for interest for Eskimo Joe's.

Note: Enter debits before credits.
Date General Journal Debit Credit
December 31, 2021

Journal entry worksheet

  • Record the adjusting entry for interest for Stillwater National Bank.

Note: Enter debits before credits.
Date General Journal Debit Credit
December 31, 2021

3. Prepare the journal entry on April 30, 2022, to record payment of the notes payable at maturity.

Journal entry worksheet

  • Record the repayment of the note at maturity for Eskimo Joe's.

Note: Enter debits before credits.
Date General Journal Debit Credit
April 30, 2022

Journal entry worksheet

  • Record the receipt of cash at maturity for Stillwater National Bank.

Note: Enter debits before credits.
Date General Journal Debit Credit
April 30, 2022

Solutions

Expert Solution

Solution

Step - (1) - Information Given -

Eskimo Joe's, borrows $21 million cash on November 1, 2021.

Eskimo Joe's signs a six-month, 7% promissory note to Stillwater National Bank under a prearranged short-term line of credit.

Interest on the note is payable at maturity. Each firm has a December 31 year-end.

.

Step - (2) -

Journal Entries in the books of -- Eskimo Joe's

Date General Journal Debit ($) Credit ($)
November 1, 2021

Cash

Note Payable

(To record note payable)

21000000

-

-

21000000
December 31, 2021

Interest Expense [$21000000 * 7% * 2/12]

Interest Payable

(To record accrued interest for 2 months)

245000

-

-

245000
April 30, 2022

Interest Expense [$21000000 * 7% * 4/12]

Interest Payable

Note Payable

Cash

(To record payment of note payable plus interest)

735000

245000

21000000

-

-

-

-

21980000
Total 43225000 43225000

.

Step - (3) -

Journal Entries in the books of -- Stillwater National Bank

Date General Journal Debit ($) Credit ($)
November 1, 2021

Notes Receivable

Accounts Receivable

(To record acceptance of note)

21000000

-

-

21000000
December 31, 2021

Interest Receivable

Interest Income [$21000000 * 7% * 6/12]

(To record accrued interest for 2 months)

245000

-

-

245000
April 30, 2022

Cash

Interest Income [$21000000 * 7% * 4/12]

Interest Receivable

Notes Receivable

(To record collection of notes receivable plus interest)

21980000

-

-

-

-

735000

245000

21000000
Total 43225000 43225000

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ekkarill92 answered 1 year ago
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