Question

 BE13-3 (LO1) Takemoto Corporation borrowed $60,000 on November 1, 2017, by signing a $61,350, 3-month, zero-interest- bearing note. Prepare Takemoto's November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry. 

 BE13-4 (LO1) Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2017, for $18 each. Prepare Sport Pro's August 1, 2017, journal entry and the December 31, 2017, annual adjusting entry, assuming the magazines are published and

Answer 1

BE13-3:

Answer:

Date	Account title and explanation	Debit	Credit
Nov.1,2017	Cash	$60,000
	Discount on notes payable	$1,350
	Notes payable		$61,350
	[To record cash borrowed in exchange of zero-interest note]
Dec 31,2017	Interest expense	$900
	Discount on notes payable		$900
	[To record accrued interest expense]
Feb 1,2018	Notes payable	$61,350
	Interest expense	$450
	Discount on notes payable		$450
	Cash		$61,350
	[To record payment for notes payable]

Calculations:

Face value of the note	$61,350
(Less): Cash received	($60,000)
Total Interest expense for 3 months	$1,350

Adjusting entry for 2 months interest (Nov.1 to Dec.31). So, Accrued interest on Dec 31 = 1,350 x 2/3 = $900.