Answer and Explanation:
According to the scenario, journal entries of the given data are as follow:-
Journal Entries
On July 1
Cash A/c Dr. $61,000
To 8% Notes payable A/c $61,000
(Being the cash borrowed from first national bank is recorded)
For recording this we debited the cash as it increases the assets and credited the note payable as it also increased the liabilities
On Nov 1
Cash A/c Dr. $73,200
To 6% Notes payable A/c $73,200
(Being the cash borrowed from first national bank is recorded)
For recording this we debited the cash as it increases the assets and credited the note payable as it also increased the liabilities
On Dec 31
Interest expense {(61,000 × 8%) × 6 ÷ 12} A/c Dr. $2,440
To Interest payable A/c $2,440
(Being interest expense is recorded)
For recording this we debited the interest expense as it increase the expenses and at the same time it also increased the liabilities so interest payable is credited
On Dec 31
Interest expense (73,200 × 6%) × 2 ÷ 12 A/c Dr. $732
To Interest payable A/c $732
(Being interest expense is recorded)
For recording this we debited the interest expense as it increase the expenses and at the same time it also increased the liabilities so interest payable is credited
On Feb 1
Notes payable A/c Dr. $73,200
Interest expenses A/c (732 ÷ 2) Dr. $366
Interest payable A/c Dr. $732
To Cash A/c $74,298
(Being cash is paid)
It decrease the liabilities, it increased the expenses so the respective accounts are debited and since cash is paid which reduced the assets so this account is credited
On April 1
Notes payable A/c Dr. $61,000
Interest expenses A/c ($2,440 ÷ 2) Dr. $1,220
Interest payable A/c Dr. $2,440
To Cash A/c $64,660
(Being cash is paid)
It decrease the liabilities, it increased the expenses so the respective accounts are debited and since cash is paid which reduced the assets so this account is credited
