Accounting for Notes Payable
Sweet’s Candy Company needed cash for its current business operations. On January 1,
2008, the company borrowed $8,000 on a two-year, interest-bearing note from Peterson
Bank at an annual interest rate of 10%. Interest is payable annually on January 1, and the
note matures January 1, 2010. Sweet’s Candy Company also borrowed $4,500 from Laurence
National Bank on January 1, 2008, signing a three-year, 11% note due on January 1, 2011,
with interest payable annually on January 1.
Required:
Prepare all journal entries relating to the two notes for 2008, 2009, 2010, and 2011. Assume
that Sweet’s Candy Company uses the calendar year for financial reporting. (Round all
amounts to the nearest dollar.)