Вы находитесь на странице: 1из 23

NOTES PAYABLE

By: Jumalon, Reicci and


Gepiga,Kyle Opel
ACC 211-2902
Problem 1
Ontario Company , a natural energy supplier , borrowed P8,000,000 cash on November

1, 2020 to fund a geological survey. The loan was granted by United Bank under

short-term credit line. Ontario issued a 9-month, 12% promissory note with interest

payable at maturity. The fiscal period is the calendar year.

Required:

• Prepare the journal entry for the issuance of the note payable by Ontario Company.

• Prepare the appropriate adjusting entry for the note payable on December 31, 2020.

• Prepare the journal entry for the payment of the note payable at maturity.
Problem 1
1. Cash 8,000,000
Note payable 8,000,000

2. Interest expense 160,000


Interest payable 160,000
(8M x 12% x 2/12)
3. Interest expense 60,000(8M x 12% 7/12)
Interest payable 160,000
Note payable 8,000,000
Cash 8,720,000
Problem 2
On October 1, 2020, Home Company issued to Security Bank a P6,000,000, 8-month, nonintcrest-bearing note. The

note payable was discounted by the bank at 12%.

Required:

• Prepare the appropriate journal entry by Home Company to record the issuance of the note.

• Prepare the adjusting entry on December 31, 2020.

• Present the note payable on December 31, 2020.

• Prepare the journal entry to record the discount amortization and payment of the note payable on June 1,2021,

date of maturity.

• Suppose the note had been structured as a 12% note with interest and principal payable at maturity. Prepare the

appropriate journal entry to record the issuance of the note by Home Company.

• Prepare the appropriate journal entry on December 31, 2020 to accrue interest expense on the note described in

requirement 5.

• Prepare the journal entry to record the payment of note payable described in requirement 5 on the date of

maturity.
Problem 2
1. Cash 5,520,000
Discount on note payable 480,000
Note payable 6,000,000
(600,000 x 12% * 8/12)

2. Interest expense 180,000


Discount on note payable (480,000 * 3/8) 180,000

3. Note payable 6,000,000


Discount on note payable 300,000
Carrying amount 5,700,000

4.Interest expense (480,000 X 5/8) 300,000


Discount on note payable 300,000

Note payable 6,000,000


Cash 6,000,000
Problem 2
5. Cash 6,000,000
Note payable 6,000,000

6. Interest expense 180,000 (6M x 12% 3/12)


Accrued interest payable 180,000

7. Interest expense 300,000 (6M x 12% x 5/12)


Note payable 6,000,000
Cash 6,300,000
Problem 3
On September 1, 2020, Trinoma Entertainment borrowed P24,000,000 cash to

fund a new Fun Park. The loan was granted by Solid Bank under a non-

committed short-term line of credit arrangement. Trinoma issued a 9-month,

12% promissory note. Interest was payable at maturity. The fiscal period is the

calendar year.

Required:

1. Prepare the journal entry for the issuance of the note by Trinoma

2. Prepare the appropriate adjusting entry for the note on December 31, 2020.

3. Prepare the journal entry for the payment of the note at maturity.
Problem 3
1. Cash 24,000,000
Note payable 24,000,000

2. Interest expense 960,000 (24,000,000 x 12% x 4/12)


Accrued interest payable 960,000

3. Interest expense 1,200,000 (24,000,000 x 12% 5/12)


Accrued interest payable 960,000
Note payable 24,000,000
Cash 26,160,000
Problem 4
Rose Company provided the following selected transactions related to liabilities:

2020

• Feb. 1 Negotiated a revolving credit agreement with Second Bank which can be renewed annually upon bank

approval. The amount available under the line of credit is P30,000,000 at the prime bank rate.

• April 1 Arranged a 3-month bank loan of P12,000,000 with Second Bank under the line of credit agreement.

Interest at the prime rate of 8% was payable at maturity

• July 1 Paid the 8% note at maturity.

• Nov. 1 Supported by the credit line, Rose Company issued P20,000,000 of commercial paper on a nine-month

note. Interest was discounted at issuance at a 6% discount rate.

• Dec. 31 Recorded any necessary adjusting entry

2021

• Aug. 1 Paid the commercial paper at maturity.

• Required:

• Prepare the appropriate journal entries through the maturity of each liability.
Problem 4
2020
• Feb 1 No entry

• April 1 Cash 12,000,000


Note payable 12,000,000

• July 1 Interest expense 240,000 (12,000,000 X 8%x3/12)


Note payable 12,000,000
Cash 12,240,000

• Nov 1 Cash 19,100,000


Discount on note payable 900,000 (20,000,000 x 6% * 9/12)
Note payable 20,000,000

• Dec 31 Interest expense 200,000 (900,000 X 2/9)


Discount on note payable 200,000
 
Problem 4
 2021
• Aug. Interest expense 700,000 (900,000 x 719)
Discount on note payable 700,000

Note payable 20,000,000


Cash 20,000,000
Problem 5
On January 1, 2020, West Company acquired a tract of land for P1,000,000.
The entity paid P100,000 down and signed a two-year promissory note for
the balance plus 10% interest compounded annually. The note matures on
January 1, 2022.
Required:
Prepare journal entries to record:
1. Purchase of land on January 1, 2020
2. Accrued interest on December 31, 2020
3. Accrued interest on December 31, 2021
4. Full payment of the note on January 1
Problem 5
 1. Land 1,000,000
Cash 100,000
Note payable 900,000

2. Interest expense 90,000(10% x 900,000)


Accrued interest payable 90,000

3. Interest expense 99,000


Accrued interest payable 99,000 (990,000*10%)

4. Note payable 900,000


Accrued interest payable 189,000
Cash 1,089,000
Problem 6
Joshua Company bought a new machine and agreed to pay in equal
installment of P 800,000 at the end of each of the next five years. The
prevailing interest rate for this type of transaction is 12%.

The present value of an ordinary annuity of 1 at 12% for five period is 3.60.
The future amount of an ordinary annuity of 1 at 12% for five period is 6.35.
The present value of 1 at 12% for five periods is 0.567.

A) What amount should be reported as note payable if financial statements


were prepared today?

B) What is the interest expense for the first year?


SOLUTION (6):

What amount should be reported as note payable if


financial statements were prepared today?

800,000 x 3.60 2,880,000

What is the interest expense for the first year?

Interest Expense (12% x 2,880,000) 345,600


Problem 7
Mann Company reported at 10% note payable of
P3,600,000 on June 30, 2018. The note is dated
October 1, 2016 and payable in three equal annual
payments of P1,200,000 plus interest. The first
interest and principal payment was made on October
1, 2017.

On June 30, 2018, what amount should be reported


as accrued interest payable for this note?
SOLUTION (7):

Note Payable, October 1, 2017 P3,600,000


Payment on October 1, 2018 (1,200,000)
Balance - October 1, 2018 2,400,000

Accrued Interest Payable (Oct. 1, 2018 – June 30, 2019) (2,400,000


x 10% x 9/12) 180,000
Problem 8
At year-end, Roth Company issued a P1,000,000 face
amount note payable in exchange for services rendered.
The note, made at usual trade terms, is due in nine
months and bears interest, payable at maturity, at the
annual rate of 3%. The market interest rate is 8%. The
compound interest factor of 1 due in nine months at 8%
is .944.

At what amount should the note payable be reported at


year-end?
SOLUTION (8):

Note Payable P1,000,000

*The note payable is shown at face value because it is


short-term and made in the usual trade terms.
Problem 9
On September 1, 2018, Pine Company issued at note
payable in the amount of P1,800,000, bearing interest
at 12% and payable in three equal annual principal
payments of P600,000. On this date the prime rate
was 11%. The first interest and principal payment
was made on September 1,2019.

On December 31 ,2019, what amount should be


reported as accrued interest payable?
SOLUTION (9):

Note Payable, September 1, 2019 P1,800,000


Payment on September 1, 2020 (600,000)
Balance - September 1, 2020 1,200,000

Accrued Interest Payable (Sept. 1 – Dec. 31, 2020)


(1,200,000 x 12% x 4/12) 48,000
Problem 10
On January 1, 2019. Easy Company reported a note payable of
P1,200,000.

The note payable is dated October 1, 2018, bears interest at 15%


and is payable in three equal annual payments of P400,000.

The first interest and principal payment was made on October 1,


2019.

What amount should be reported as interest expense for


2019?
SOLUTION (10):
Note Payable, October 1, 2019 P1,200,000
Payment on October 1, 2020(400,000)
Balance - October 1, 2020 800,000

Interest Paid (Jan.1 – Sept. 30, 2020) 135,000


(1,200,000 x 15% x 9/12)
Interest Accrued (Oct. 1 – Dec. 31, 2020) 30,000
(800,000 x 15% x 3/12)

Interest Expense 165,000