Question

Dunlin Development Company had the following transactions involving notes payable. Nov. 1, 2016 Borrows $120,000 from Merchants and Marine Bank by signing a 3-month, 10% note. Dec. 31, 2016 Prepares the adjusting entry. Feb. 1, 2017 Pays principal and interest to Merchants and Marine Bank. Prepare journal entries for each of the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

November 1, 2016

Dr Cash 120,000

Cr Notes Payable 120,000

December 31, 2016

Dr Interest Expense 2,000

Cr Interest Payable 2,000

February 1, 2017

Dr Notes Payable 120,000

Dr Interest Payable 2,000

Dr Interest Expense 1,000

Cr Cash 123,000

Step-by-step explanation:

Dunlin Development Company Journal entries

November 1, 2016

Dr Cash 120,000

Cr Notes Payable 120,000

December 31, 2016

Dr Interest Expense 2,000

($120,000 ×10% ×2/12)

Cr Interest Payable 2,000

February 1, 2017

Dr Notes Payable 120,000

Dr Interest Payable 2,000

Dr Interest Expense 1,000

(120,000×10%×1/12)

Cr Cash 123,000