Question

On October 1, Vaughn's Carpet Service borrows $349000 from First National Bank on a 4-month, $349000, 9% note. What entry must Vaughn's Carpet Service make on December 31 before financial statements are prepared

Answer 1

Dr Notes Payable 349,000

Dr Interest Payable 10,470

Cr Cash 359,470

Step-by-step explanation:

Preparation of Vaughn's Carpet Service Journal entry

Since we were told that Vaughn's Carpet Service borrows the amount of $349,000 on 1st October from First National Bank based on a 4-month, $349,000, 9% note the transaction will be recorded as :

Dr Notes Payable 349,000

Dr Interest Payable 10,470

Cr Cash 359,470

$349,000 +($349,000 *.09* 4/12)

=$349,000+10,470

=$359,,470