2 2 points On 053015 S borrowed 600000 at 5 S made quarterly

2. (2 points) On 05-30-15, S borrowed $600,000 at 5%. S made quarterly interest payments on 08-31-15 and 11-30-15. On 02-28-16, S made the last interest payment and paid back the principle. S only prepares AJEs every 12-31. Prepare the entries S made on:

a. 05-30-15

b. 08-31-15

c. 11-30-15

d. 12-31-15

e. 02-28-16

Solution

Date Account Debit Credit 5-30-15 Cash 600000 Note payable 600000 [Borrowed money ] 8-31-15 Interest expense 7500 Cash 7500 [Interest for 3 months= 600000*5%*3/12= 7500] 11-30-15 Interest expense 7500 Cash 7500 [Interest for 3 months= 600000*5%*3/12= 7500] 12-31-15 Interest expense 2500 Interest payable 2500 [Interest accrued for 1 month = 600000*5%*1/12= 2500] 02-28-16 Interest expense 5000 Interest payable 5000 [Interest accrued for 2 months = 600000*5%*1/12= 5000] 02-28-16 Interest payable 7500 Cash 7500 [Accrured interest paid] 02-28-16 Note payable 600000 Cash 600000 [ Note payable repaid]