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Fantom [35]
2 years ago
9

Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Neiman

Marcus is one of America's most prestigious retailers. Each Christmas season, Neiman Marcus builds up its inventory to meet the needs of Christmas shoppers. A large portion of these Christmas sales are on credit. As a result, Neiman Marcus often collects cash from the sales several months after Christmas. Assume that on November 1 of this year, Neiman Marcus borrowed $ 4.8 million cash from Bank of America to meet short-term obligations. Neiman Marcus signed an interest-bearing note and promised to repay the $ 4.8 million in six months. The annual interest rate was 8 % . All interest will accrue and be paid when the note is due in six months. Neiman Marcus's accounting period ends December 31.
(a) Provide the journal entry to record the note on November 1.
Business
1 answer:
Anna35 [415]2 years ago
5 0

Date  Accounts and Explanation      Debit               Credit

1-Nov           cash                             4800000  

        Notes payable                                                  4800000

( To record the cash borrowed)

31-Dec Interest Expense

         ( 4800000*8%*2/12)                      64000  

       Interest payable                                                      64000

( To record the accrued interest)  

30-Apr Interest Expense

       ( 4800000*8%*6/12)                       192000  

Notes payable                                     4800000  

     cash                                                                        4992000

( To record the payment of

  interest and notes payable)  

For example, on September 1st, a company borrows $1,000 and the monthly interest rate on the loan balance is 4%. The interest expense for September is $40 ($1000 x 4%). The company will then pay off his $500 loan on his October 1st. The interest expense for October is $20 (500 x 4%).

Learn more about Interest Expenses at

brainly.com/question/21273548

#SPJ4

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