on march 1, lge asks to extend its past - due $8,000 account payable to tyson. tyson agrees to accept $1,900…
on march 1, lge asks to extend its past - due $8,000 account payable to tyson. tyson agrees to accept $1,900 cash and a 180 - day, 8%, $6,100 note payable to replace the account payable. note: use 360 days a year. (1) prepare the march 1 entry for lge. (2) prepare the august 28 entry for lge when it pays the note and interest to tyson. view transaction list journal entry worksheet 1 2 record lges entry to extend its past - due $8,000 account payable by paying cash of $1,900 and issuing a 180 - day, 8%, $6,100 note payable. note: enter debits before credits. date general journal debit credit march 01
Answer
Explanation:
Step1: Record March 1 entry
Debit accounts payable for the full amount owed ($8,000). Credit cash for the amount paid ($1,900) and credit notes payable for the note amount ($6,100).
| Date | General Journal | Debit | Credit |
|---|---|---|---|
| March 01 | Accounts Payable | $8,000 | |
| Cash | $1,900 | ||
| Notes Payable | $6,100 |
Step2: Calculate interest on note
The formula for simple - interest is $I = P\times r\times t$, where $P=$6,100$, $r = 8%=0.08$ and $t=\frac{180}{360}$. So, $I=6100\times0.08\times\frac{180}{360}=$244$.
Step3: Record August 28 entry
Debit notes payable for the principal amount ($6,100) and debit interest expense for the calculated interest ($244). Credit cash for the total amount paid ($6,100 + 244=$6,344).
| Date | General Journal | Debit | Credit |
|---|---|---|---|
| August 28 | Notes Payable | $6,100 | |
| Interest Expense | $244 | ||
| Cash | $6,344 |
Answer:
March 1 entry:
| Date | General Journal | Debit | Credit |
|---|---|---|---|
| March 01 | Accounts Payable | $8,000 | |
| Cash | $1,900 | ||
| Notes Payable | $6,100 | ||
| August 28 entry: | |||
| Date | General Journal | Debit | Credit |
| -- | -- | -- | -- |
| August 28 | Notes Payable | $6,100 | |
| Interest Expense | $244 | ||
| Cash | $6,344 |