Homework SourseAlpha Company prepares quarterly adjusting entries On August
Alpha Company prepares quarterly adjusting entries. On August 1, 2017. Alpha Company purchased equipment with a sticker price of $8,515 and signed a note due in 9 months for $10,000 that included interest in the valve of the note. Use this information to prepare the general journal entry for the November 1 equipment purchase. Prepare any additional general journal adjusting entries for Fiscal Years 2017 $ 2018. Additionally, prepare the general journal entry to record the payment of the note when due in 2018.
Solution
Total Interest Payable on Note = 10000 - 8515 = $1,485
Monthly Interest = 1485 / 9 = $165 per month
| Date | Account Titles and Explanation | Debit | Credit |
| 1 August 2017 | Equipment | 8,515 | |
| Deferred Interest Expense | 1,485 | ||
| Notes Payable | 10,000 | ||
| 30 September 2017 | Interest Expense (165*2) | 330 | |
| Deferred Interest Expense | 330 | ||
| 31 December 2017 | Interest Expense (165*3) | 495 | |
| Deferred Interest Expense | 495 | ||
| 31 March 2018 | Interest Expense (165*3) | 495 | |
| Deferred Interest Expense | 495 | ||
| 30 April 2018 | Interest Expense (165*1) | 165 | |
| Deferred Interest Expense | 165 | ||
| 30 April 2018 | Notes Payable | 10,000 | |
| Cash | 10,000 |
