Question
Notes and Interest McLaughlin Inc. operates with a June 30 year-end. During 2017, the following transactions occurred: January 1: Signed a one-year, 10% loan for
Notes and Interest
McLaughlin Inc. operates with a June 30 year-end. During 2017, the following transactions occurred:
- January 1: Signed a one-year, 10% loan for $35,000. Interest and principal are to be paid at maturity.
- January 10: Signed a line of credit with Little Local Bank to establish a $560,000 line of credit. Interest of 9% will be charged on all borrowed funds.
- February 1: Issued a $28,000 non-interest-bearing, six-month note to pay for a new machine. Interest on the note, at 12%, was deducted in advance.
- March 1: Borrowed $210,000 on the line of credit.
- June 1: Repaid $140,000 on the line of credit plus accrued interest.
- June 30: Made all necessary adjusting entries.
- August 1: Repaid the non-interest-bearing note.
- September 1: Borrowed $280,000 on the line of credit.
- November 1: Issued a three-month, 8%, $16,800 note in payment of an overdue open account.
- December 31: Repaid the one-year loan [from transaction (a)] plus accrued interest.
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank or enter 0. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
| Accounts PayableCashInterest PayableNotes PayableNotes ReceivableNo Entry | fill in the blank 0ca31ef9cfcc01e_2 | CashInterest ExpenseInterest RevenueNotes PayableNotes ReceivableNo Entry | fill in the blank 0ca31ef9cfcc01e_4 | fill in the blank 0ca31ef9cfcc01e_5 | CashInterest ExpenseInterest PayableNotes PayableNotes ReceivableNo Entry | fill in the blank 0ca31ef9cfcc01e_7 | CashInterest ExpenseInterest PayableInterest ReceivableNotes PayableNo Entry | fill in the blank 0ca31ef9cfcc01e_9 | fill in the blank 0ca31ef9cfcc01e_10 | |||||
f. June 30: Made all necessary adjusting entries.
The adjustment for interest owed:
| Activity | OperatingInvestingFinancingInvesting and Financing |
| Accounts | Interest Payable Increase, Interest Expense IncreaseInterest Payable Increase, Interest Expense DecreaseInterest Payable Decrease, Interest Expense IncreaseInterest Payable Decrease, Interest Expense Decrease |
| Statement(s) | Balance Sheet onlyIncome Statement onlyBalance Sheet and Income Statement |
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank or enter 0. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
| CashDiscount on Notes PayableInterest ExpenseInterest PayableNotes PayableNo Entry | fill in the blank 152068f66fee060_2 | Accounts PayableCashInterest ExpenseInterest PayableNotes ReceivableNo Entry | fill in the blank 152068f66fee060_4 | fill in the blank 152068f66fee060_5 | Accounts PayableCashInterest ExpenseInterest PayableInterest ReceivableNo Entry | fill in the blank 152068f66fee060_7 | CashDiscount on Notes PayableInterest ExpenseInterest PayableNotes PayableNo Entry | fill in the blank 152068f66fee060_9 | fill in the blank 152068f66fee060_10 | |||||
The adjustment to amortize the discount on the note:
| Activity | OperatingInvestingFinancingInvesting and Financing |
| Accounts | Discount on Notes Payable Increase, Interest Expense IncreaseDiscount on Notes Payable Increase, Interest Expense DecreaseDiscount on Notes Payable Decrease, Interest Expense IncreaseDiscount on Notes Payable Decrease, Interest Expense Decrease |
| Statement(s) | Balance Sheet onlyIncome Statement onlyBalance Sheet and Income Statement |
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank or enter 0. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
| Accounts PayableCashInterest ExpenseInterest PayableNotes PayableNo Entry | fill in the blank c168e806a054012_2 | CashDiscount on Notes PayableInterest ExpenseInterest PayableNotes PayableNo Entry | fill in the blank c168e806a054012_4 | fill in the blank c168e806a054012_5 | CashDiscount on Notes PayableInterest ExpenseInterest PayableNotes PayableNo Entry | fill in the blank c168e806a054012_7 | Accounts PayableCashDiscount on Notes PayableInterest ExpenseInterest PayableNo Entry | fill in the blank c168e806a054012_9 | fill in the blank c168e806a054012_10 | |||||
g. August 1: Repaid the non-interest-bearing note.
| Activity | OperatingInvestingFinancingInvesting and Financing |
| Accounts | Cash Increase, Discount on Notes Payable Decrease, Notes Payable Decrease, Interest Expense IncreaseCash Increase, Discount on Notes Payable Decrease, Notes Payable Decrease, Interest Expense DecreaseCash Decrease, Discount on Notes Payable Decrease, Notes Payable Decrease, Interest Expense IncreaseCash Decrease, Discount on Notes Payable Decrease, Notes Payable Decrease, Interest Expense Decrease |
| Statement(s) | Balance Sheet onlyIncome Statement onlyBalance Sheet and Income Statement |
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank or enter 0. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
| Accounts ReceivableCashDiscount on Notes PayableInterest PayableNotes PayableNo Entry | fill in the blank 1892f600afc4fc8_2 | CashInterest ExpenseInterest ReceivableNotes PayableNotes ReceivableNo Entry | fill in the blank 1892f600afc4fc8_4 | fill in the blank 1892f600afc4fc8_5 | Accounts PayableCashDiscount on Notes payableInterest ExpenseNotes ReceivableNo Entry | fill in the blank 1892f600afc4fc8_7 | Accounts ReceivableDiscount on Notes PayableInterest ExpenseInterest PayableNotes PayableNo Entry | fill in the blank 1892f600afc4fc8_9 | fill in the blank 1892f600afc4fc8_10 | |||||
| Accounts ReceivableDiscount on Notes PayableInterest ExpenseInterest PayableNotes PayableNo Entry | fill in the blank 1892f600afc4fc8_12 | Accounts PayableCashDiscount on Notes PayableInterest ExpenseNotes ReceivableNo Entry | fill in the blank 1892f600afc4fc8_14 | fill in the blank 1892f600afc4fc8_15 | Accounts PayableCashDiscount on Notes payableInterest ExpenseNotes ReceivableNo Entry | fill in the blank 1892f600afc4fc8_17 | CashDiscount on Notes PayableInterest PayableInterest RevenueNotes PayableNo Entry | fill in the blank 1892f600afc4fc8_19 | fill in the blank 1892f600afc4fc8_20 | |||||
h. September 1: Borrowed $280,000 on the line of credit.
| Activity | OperatingInvestingFinancingInvesting and Financing |
| Accounts | Cash Increase, Notes Payable IncreaseCash Increase, Notes Payable DecreaseCash Decrease, Notes Payable IncreaseCash Decrease, Notes Payable Decrease |
| Statement(s) | Balance Sheet onlyIncome Statement onlyBalance Sheet and Income Statement |
How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank or enter 0. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | Expenses | = | Income | ||||||
| Accounts PayableCashDiscount on Notes PayableInterest PayableNotes PayableNo Entry | fill in the blank ca8374f97fa0fc0_2 | CashInterest ExpenseInterest PayableNotes PayableNotes ReceivableNo Entry | fill in the blank ca8374f97fa0fc0_4 | fill in the blank ca8374f97fa0fc0_5 | Accounts ReceivableCashInterest ExpenseNotes PayableNotes ReceivableNo Entry | fill in the blank ca8374f97fa0fc0_7 | Accounts PayableCashNotes PayableInterest PayableInterest ReceivableNo Entry | fill in the blank ca8374f97fa0fc0_9 | fill in the blank ca8374f97fa0fc0_10 | |||||
i. November 1: Issued a three-month, 8%, $16,800 note in payment of an overdue open account.
| Activity | OperatingInvestingFinancingInvesting and Financing |
| Accounts | Accounts Payable Increase, Notes Payable IncreaseAccounts Payable Increase, Notes Payable DecreaseAccounts Payable Decrease, Notes Payable IncreaseAccounts Payable Decrease, Notes Payable Decrease |
| Statement(s) | Balance Sheet onlyIncome Statement onlyBalance Sheet and Income Statement |
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Computerized Accounting With QuickBooks 2014
Authors: Kathleen Villani, James B. Rosa, Blanche Ettinger
1st Edition
0763860239, 9780763860233
