Recording Entries for Interest-Bearing and Noninterest-Bearing Notes

Anne Taylor Company borrowed cash on August 1 of Year 1, by signing a $66,600 (face amount), one-year note payable, due on July 31 of Year 2. The accounting period of Anne Taylor ends December 31. Assume an effective interest rate of 11%.

Interest-Bearing Note

a. How much cash should Anne Taylor Company receive from the note on August 1 of Year 1, assuming the note is an interest-bearing note?

$

b. Provide the following entries and reporting amounts:

1. August 1 of Year 1, date of the loan. 2. December 31 of Year 1, adjusting entry. 3. July 31 of Year 2, payment of the note

c. What liability amounts should be shown on the December 31 of Year 1 balance sheet?

Noninterest-Bearing Note

d. Answer (a) and (c) assuming that the note is noninterest-bearing. Use the straight-line method to amortize any discount on note payable.

a. How much cash should Anne Taylor Company receive from the note on August 1 of Year 1, assuming the note is a noninterest-bearing note?

$

c. What liability amounts should be shown on the December 31 of Year 1 balance sheet?

- Note: Round your answers to the nearest whole dollar. Balance Sheet, Dec. 31 Year 1 Current liabilities Note Payable 5 Balance Sheet, Dec. 31 Year 1 c. Current liabilities $