Question

Taylor Bank lends Guarantee Company $92,811 on January 1. Guarantee Company signs a $92,811, 12%, nine-month note. The entry made by Guarantee Company on January 1 to record the proceeds and issuance of the note is

Answer 1

Dr Cash $92,811

Cr Notes Payables $92,811

(Being the proceeds and issuance of note

Step-by-step explanation:

Annual rate = 12%

Interest for 9 months will be:

9/12 x 12% = 9%

So disbursal is 9% x $92,811

= $8,353

Principal (borrowed money) is $92,811.

The loan was disbursed on January 1. So it's only the proceeds from the loan which will be recorded on this date. Repayment will start at later date.

Therefore, The entry made by Guarantee Company on January 1 will be:

January 1

Dr Cash $92,811

Cr Notes Payables $92,811

(Being the proceeds and issuance of note)