Project #9 Interest Payable SED Preview of Chapter Bonds are another way that companies can raise money from investors, for operations. Fido issued $12,000 of bonds at par. Bonds have a promise to repay the face value of the bond, in this case $12,000, and to pay annual interest at the stated interest rate. The stated interest rate for Fidos bonds is 10% per year. The face value of the bonds will not be paid for several years. No entry is required for the repayment at this time. Interest expense is what a business incurs for the use of money. It is important to remember the formula to calculate interest expense. The formula is: Interest - Principal * Rate x Time (L-PRT). Time is generally considered to be one (1). In most accounting problems, time is one year or twelve (12) months over twelve (12) months. In many accounting problems, interest is being solved for less than one year. If calculating for two (2) months, time would be 2/12 or 1/6. If calculating for six (6) months, time would be 6/12 or 1/2, and so on. Interest is accrued as time passes. Making this journal entry records the company's use of money for its first months of business. Prepare Postclosing Trial Balance Analyze and Record Journal Entries Record Closing Journal Entries Post to Ledger Accounts Esarco Prepare Financial Statements Prepare Unadjusted Trial Balance Courtesy of Laura K. Bantz and Ann Prepare Adjusted Trial Balance Record Adjusting Journal Entries Credits Debits 52,898 10,250 cccceeeeeeeeeeeeLEHE 1,260 20,390 650 320 30,550 12,250 1,780 62,128 Fido's Food Mart Adjusted Trial Balance December 31, 20XX Account Title Cash Accounts Receivable Less: Allowance for Doubtful Accounts Inventory Supplies Prepaid Insurance Equipment Vehicle Less: Accumulated Depreciation - Equipment and Vehicle Accounts Payable Interest Payable Unearned Revenue (Gift Cards) Bonds Payable (mature 12/31/XX) Common Stock (200 shares @ $210/share, par $210) Retained Earnings Sales Revenue Less: Sales Discount Cost of Goods Sold Operating Expenses Bad Debt Expense Depreciation Expense Insurance Expense Interest Expense Rent Expense Supplies Expense Wages Expense Totals 275 12,000 42,000 134,725 40 64,330 34,840 3,260 1,780 160 0 5,750 1,200 15,500 254,168 254,168 Project for laterest Payable 55. n order to finance the opening of the store, do's Food Mart issued $12,000 of bonds that pay 10% interest annually. Interest is paid January 31 for interest that accrued during the prior year. Bonds were issued at face value on September 1. Required: 1. Calculate the interest payable to the bond holders from September 1 to December 31. 2. Record the adjusting journal entry for the interest payble. 2. Show the balancing effects on the accounting equation 6. Record the adjusting journal entry in two-line format using a debit and a credit. c. Show T-accounts with beginning balances, transactions, and end balances. 3. Prepare a new adjusted trial balance and highlight the accounts and amounts changed. TIME = MONEY womiss/Shutterstock Formula Interest = Principal x Rate x Time Formula example Principal Annual Rate of Interest Time (One Year) 15,000 8% Time Interest Principal 15,000 15,000 1200 Rate 8% 8% 8% One Full Year One-Half Year Quarter Year Two Months One Month 1/2 600 300 15,000 1/4 15,000 8% 1/6 200 15,000 8% 1/12 100
