Question

C.S. Blossom Company had the following transactions involving notes payable.

July 1, 2022 Borrows $68,000 from First National Bank by signing a 9-month, 8% note
Nov. 1, 2022 Borrows $71,000 from Lyon County State Bank by signing a 3-month, 6% note.
Dec. 31, 2022 Prepares adjusting entries.
Feb. 1, 2023 Pays principal and interest to Lyon County State Bank.
Apr. 1, 2023 Pays principal and interest to First National Bank.
Prepare journal entries for each of the transactions. (Credit account titles are automatically indented wher manually. Record journal entries in the order presented in the problem.)

Answer 1

Journal entries for the transactions of C.S. Blossom Company involving notes payable are detailed, with separate entries for borrowing funds, adjusting for accrued interest, and repaying principal and interest.

Step-by-step explanation:

C.S. Blossom Company has several transactions involving notes payable that require journal entry preparation. Here are the entries for each event:

July 1, 2022: Borrowing from First National Bank

• Debit: Cash $68,000
• Credit: Notes Payable $68,000

Nov. 1, 2022: Borrowing from Lyon County State Bank

• Debit: Cash $71,000
• Credit: Notes Payable $71,000

Dec. 31, 2022: Adjusting Entry for Accrued Interest

• Interest on the note from First National Bank (for 6 months): $68,000 × 8% × (6/12) = $2,720
• Interest on the note from Lyon County State Bank (for 2 months): $71,000 × 6% × (2/12) = $710
• Debit: Interest Expense $3,430 ($2,720 + $710)
• Credit: Interest Payable $3,430

Feb. 1, 2023: Payment to Lyon County State Bank

• Total interest for 3 months: $71,000 × 6% × (3/12) = $1,065
• Debit: Notes Payable $71,000
• Debit: Interest Payable $710
• Debit: Interest Expense $355 ($1,065 - $710 previously recognized)
• Credit: Cash $72,065 ($71,000 + $1,065)

Apr. 1, 2023: Payment to First National Bank

• Total interest for 9 months: $68,000 × 8% × (9/12) = $4,080

• Debit: Notes Payable $68,000
• Debit: Interest Payable $2,720
• Debit: Interest Expense $1,360 ($4,080 - $2,720 previously recognized)
• Credit: Cash $72,080 ($68,000 + $4,080)

Answer 2

The student's question involves creating journal entries for transactions concerning notes payable for C.S. Blossom Company, including borrowing from banks and preparing adjusting entries for those loans.

Step-by-step explanation:

The student is asking for assistance with preparing journal entries for different transactions involving notes payable for C.S. Blossom Company. The first transaction is for borrowing $68,000 from First National Bank on a 9-month, 8% note on July 1, 2022. The second transaction is borrowing $71,000 from Lyon County State Bank on a 3-month, 6% note on November 1, 2022. Adjusting entries need to be prepared on December 31, 2022. The company must repay the principal and interest to Lyon County State Bank on February 1, 2023, and to First National Bank on April 1, 2023.

Journal Entries:

July 1, 2022: Debit Cash $68,000; Credit Notes Payable $68,000. (To record the borrowing of funds.)

November 1, 2022: Debit Cash $71,000; Credit Notes Payable $71,000. (To record the borrowing of funds.)

December 31, 2022 (Adjusting Entry):Debit Interest Expense; Credit Interest Payable. (Interest amount is calculated based on the notes and their respective interest rates for the time period they are outstanding until December 31, 2022.)

February 1, 2023: Debit Notes Payable $71,000; Debit Interest Expense; Credit Cash. (The interest is calculated for the time period the note was outstanding.)

April 1, 2023: Debit Notes Payable $68,000; Debit Interest Expense; Credit Cash. (Interest is calculated for the entire 9-month period.)