Question

Year 1 Transactions for Adomain
Transaction #	Date	Event
1	January 1	Spent $17,000 in cash for costs related to research and development of new products.
2	March 15	Paid last year's income tax liability.
3	April 1	Received cash of $22,500 in advance for services. The service will be performed over the course of 5 months beginning on Dec. 1 of this year.
4	April 1	Prepaid $36,000 in rent for the next 12 months and recorded the transaction as an asset.
5	April 1	Purchased inventory for $23,000. Paid $1500 in cash and recorded an accounts payable for the rest.
6	April 5	Paid $16,000 in cash for marketable securities.
7	May 1	Sold inventory on account for $175,000. The cost of the inventory was $40,000. Also, paid a sales commission on this sale of $10,000.
8	June 30	Received the cash to settle $75,000 of the receivables recorded on May 1.
9	July 15	Purchased a patent for $35,000 in cash.
10	July 31	Purchased supplies for $3000 in cash. The accountant accidently recorded it as an Accounts Receivable.
10	July 31	Adjust the account to reflect how the accountant should have recorded it.
11	Sept 30	Borrowed $15,000 from a local bank and signed a 3-year note payable promising to pay 10% interest per year (interest is due on Dec 30).
12	October 1	Purchased PPE for $29,000 cash.
13	October 1	Billed a company $80,000 for services performed and completed.
14	October 31	Received $80,000 in cash relating to the Accounts Receivable in transaction 13.
15	Dec 1	Salaries of general officers were $18,000. The company paid $7,000 now and the remainder will be paid on Jan 1, Year 2.
16	Dec 31	Income Tax for Year 1 is $22,000. $19,000 is paid this year and the remainder will be paid on March 15 of Year 2.
17	Dec 31	Record the appropriate adjusting entry related to unearned revenue described in transaction 3.
18	Dec 31	Record the appropriate adjusting entry related to the rent described in transaction 4.
19	Dec 31	$500 of supplies are still on hand on Dec 31. Record the appropriate adjusting entry to reflect the supplies left on hand. (Refer to transaction 10)
20	Dec 31	Record the appropriate adjusting entry related to the note payable described in transaction 11. Create Journal Entries

Answer 1

Appropriate adjusting entry related to the note payable :

Transaction	Date	General journal	Dr	Cr
11	Dec 30	Interest expense [15000 * 10% * 3 /12 months]	375
		Interest payable		375
		[Being interest on notes payable due on 30 Dec is recorded]

Note:- Journal entry for Borrowing $15,000 borrowed and signed a 3-year note payable

Transaction	Date	General journal	Dr	Cr
11	Sept 30	Cash	15000
		Long term Notes payable		15000
		[Being $15,000 borrowed and signed a 3-year note payable ]