Blackboard Homework Assignment Bb31 QUESTION On July1 2018 S

Blackboard Homework Assignment Bb3-1 QUESTION: On July1, 2018, Sportswear, Inc. (\"Sportswear\") signs a note payable in the amount of $10,000. The note is an 8-month note, with an 8% interest rate. (1) The 8% interest rate is an annual rate? In your own words, explain what this means. (2) What is the TOTAL interest that Sportswear will pay over the life of the note? Sho calculations. (3) If Sportswear makes monthly adjusting entries, hovw much interest expense is 2018? Journalize the entry. Show all calculations. accrued on July 31, (4) If Sportswear makes quarterly adjusting entries, how much interest expense is 30, 2018? Journalize the entry. Show all calculations. accrued on (5) If Sportswear makes annual adjusting entries, how much interest expense is accrued on 31, 2018 Journalize the entry. Show all calculations. December

Solution

Ans 1(1) yes it is annual interest rate because interest rate is quoted annually by bank or any other authority.and it should be adjusted according to the life of bond or note

2) total interest payble =10000$*8*8/100/12 =533.33

(3) if int accured monthly =533.33/8=66.67

July 31 Interest A/c Dr. 66.67

To int outstqnding a/c 66.67

(4) if int acctued quaterly =533.33/8*3=199.99

sep 30 Interest A/c dr 199.99

To interest outstanding A/c199.99

(5) if int accrued annually then

Interest a/c dr.399.99

To interest outstanding A/c 399.99

533.33/8*6=399.99

because upto dec 31 there are 6 month

To interest outstanding A/c 199