Question

PLEASE PREPARE GENERAL ENTRIES AND ADJUSTING JOURNAL ENTRIES.

Eddie Edwards and Phil Bell own and operate The Second Hand Equipment Shop. The following transactions involving notes and interest were completed during the last three months of 20 Oct. 1 Issued a $6,800, 60-day, 5% note to Mac Farm Equipment for purchase of merchandise. Received a $2,000, 60-day, 6% note from R. Chambers in payment for sale of merchandise. Discounted the note received from R. Chambers on October 15 at Merchants National Bank. The discontrate is 7% 15 Nov. 1 1 Borrowed $5,000 from First National Bank on a three-month, non-interestbearing note that was discounted at 6% 20 Received a $4,000, 90-day, 6.5% note from L. Revsine in payment of an account receivable. 30 Issued a check to Mac Farm Equipment in payment of the note issued on October 1, including interest 1 0 16 Dec. Issued a $3,000, 90-day, 6% note to Remak Tractors to extend time for payment of an account payable. Received notification from Merchants National Bank that R. Chambers has dishonored his note. A check is issued to cover the note plus a $20 bank fee that must be paid to the bank. Required 1. Prepare general journal entries for the transactions. 2. Prepare necessary adjusting entries for the notes outstanding on December 31

Answer 1

Ans- Journal Entries

Date	Account Title and Explanation	Debit ($)	Credit ($)
Oct.1	Merchandise A/c Dr.	6,800
	5% Notes Payable A/c		6,800
	(To record the issue of notes for purchasing merchandise)
Oct.15	6% Notes Receivable A/c Dr.	2,000
	Sales A/c		2,000
	(To record the sale of merchandise)
Nov.1	Cash A/c Dr.	1,860
	Discount on Notes Receivable A/c ($2,000*7%)	140
	6% Notes Receivable A/c		2,000
	(To record the ensachment of notes from bank)
Nov.1	Cash A/c Dr.	4,700
	Discount on Notes Payable A/c Dr. ($5,000*6%)	300
	Notes Payable A/c		5,000
	(To record the sum borrowed from First National Bank)
Nov.20	6.5% Notes Receivable A/c Dr.	4,000
	Accounts Receivable		4,000
	(To record the notes received)
Nov.30	5% Notes Payable A/c Dr.	6,800
	Interest on 5% Notes Payable A/c ($6,800*5%*60/360)	57
	Cash A/c		6,857
	(To record the payment made for notes payable with interest)
Dec.10	Accounts Payable A/c Dr.	3,000
	6% Notes Payable A/c		3,000
	To record the issue of notes payable)
Dec.16	6% Notes Receivable A/c Dr.	2,000
	Bank Fee A/c Dr.	20
	Bank A/c		2,020
	(To record the dishonoured of note)

Adjusting Entries:-

Date	Account Title and Explanation	Debit ($)	Credit ($)
Dec.31	Interest Receivable A/c Dr.	34.61
	Interest on 6% Notes Receivable A/c ($2,000*6%*15/360) (from Oct.15 to Nov.1)		5
	Interest on 6.5% Notes Receivable A/c ($,4000*6.5%*41/360) (from Nov.20 to Dec.31)		29.61
	(To record the interest receivable)
Dec.31	Interest on 6% Notes Payable ($3,000*6%*21/360)	10.5
	Interest Payable A/c		10.5
	(To record the interest payable ) (from Dec.10 to Dec.31)