Question

C.S. Cullumber Company had the following transactions involving notes payable. July 1, 2022 Borrows $74,000 from First National Bank by signing a 9-month, 8% note. Nov. 1, 2022 Borrows $77,000 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.

Answer 1

The following journal entries will be passed in the books of accounts:

Explanation:

date  account and explanation  Debit  Credit

July 1  Cash                               74000  

Notes payable-First national bank   74000    

Nov 1  Cash                                  77000  

Notes payable-Lyon country state bank   77000    

Dec 31  Interest expense                 2960  

Interest payable                                           2960

(to record accrued interest)        

Interest expense                             770  

Interest payable                                            770

(To record accrued interest)        

Feb 1  Notes payable-Lyon country state bank  77000  

Interest payable                                                      770  

Interest expense                                                   385  

Cash                                                                          78155

(To record amount paid)        

Apr 1  Notes payable-First national bank  74000  

Interest payable                                           2960  

Interest expense                                           1480  

Cash                                                                     78440

(To record amount paid)