Exercise 960 Algorithmic Note Interest Payment and Interest

Exercise 9-60 (Algorithmic)
Note Interest Payment and Interest Expense (Effective Interest)

Cardinal Company sold $186,000 of 10-year, 8 percent notes for $175,075. The notes were sold December 31, 2011, and pay interest semiannually on June 30 and December 31. The effective interest rate was 10 percent. Assume Cardinal uses the effective interest rate method.

1. Prepare the entry to record the sale of the notes. If an amount box does not require an entry, leave it blank.

Dec. 31

2. Determine the amount of the semiannual interest payments for the notes.
$   

3. Prepare the amortization table through 2013. If an amount box does not require an entry, please enter zero (\"0\"). If required, round your answers to the nearest whole dollar.

   

   

   

Period

Cash Payment
(Credit)

Interest Expense
(Debit)

Discount on
Notes Payable
(Credit)

Discount on
Notes Payable
Balance

Carrying
Value

At issue

  

  

  

$  

$  

6/30/12

  

  

  

  

  

12/31/12

  

  

  

  

  

6/30/13

$  

  

  

  

  

12/31/13

  

  

  

  

  

4. Prepare the entry for Cardinal\'s journal at June 30, 2012 to record the payment of six months\' interest and the related interest expense. If an amount box does not require an entry, leave it blank. If required, round your answers to the nearest whole dollar.

5. Determine interest expense for 2013. If required, round your answer to the nearest whole dollar.
$

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

1. Prepare the entry to record the sale of the notes. If an amount box does not require an entry, leave it blank. Dec. 31 2. Determine the amount of the semiannual interest payments for the notes. $    3. Prepare the amortization table through 2013. If an amount box does not require an entry, please enter zero (\"0\"). If required, round your answers to the nearest whole dollar. Period Cash Payment (Credit) Interest Expense (Debit) Discount on Notes Payable (Credit) Discount on Notes Payable Balance Carrying Value At issue $   $   6/30/12 12/31/12 6/30/13 $   12/31/13 4. Prepare the entry for Cardinal\'s journal at June 30, 2012 to record the payment of six months\' interest and the related interest expense. If an amount box does not require an entry, leave it blank. If required, round your answers to the nearest whole dollar. Jun 30 Record interest expense 5. Determine interest expense for 2013. If required, round your answer to the nearest whole dollar. $

Solution

1) Date Account titles & Explanations Debit Credit 12/31/2011 Cash 175,075 Discount on notes payable 10,925 Notes payable 186,000 2) Semi annual interest payment on notes 186,000*8%*1/2 7440 3) Amortization table period Cash interest discount Discount Carrying payment expense on N/P N/P bal value 5% At issue 10,925 175,075 6/30/2012 7440 8754 1314 9611 176389 12/31/2012 7440 8819 1379 8232 177768 6/30/2013 7440 8888 1448 6783 179217 12/31/2013 7440 8961 1521 5263 180737 4) Date Account titles & Explanations Debit Credit 6/30/2012 Interest expense 8,754 Discount on notes payable 1314 cash 7,440 5) interest expense for 2013   = 8819