1. Mohammed LLC is a growing consulting firm. The following transactions take place during the current year.
2. On June 10, Mohammed borrows $270,000 from a bank to cover the initial cost of expansion. Terms of the loan are payment due in four months from June 10, and annual interest rate of 5%.
3. On July 9, Mohammed borrows an additional $100,000 with payment due in four months from July 9, and an annual interest rate of 12%.
4. Mohammed pays their accounts in full on October 10 for the June 10 loan, and on November 9 for the July 9 loan.

Record the journal entries to recognize the initial borrowings, and the two payments for Mohammed.

Solution

Jun. 10		270,000
			270,00
	To record loan, 5% interest, payable in four months

Jul. 9		100,000
			100,00
	To record loan, 12% interest, payable in four months

Oct. 10	Short-Term Notes Payable
	Interest Expense
	Cash
	To record honored short-term loan, 5% interest, payable in four months

Nov. 9	Short-Term Notes Payable
	Interest Expense
	Cash
	To record honored short-term loan, 12% interest, payable in four months