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Journal entry for accounting?
on January 1, 2005 Company A agrees to lend $10,000 to company B if Company B signs a $12,000 10% 2 month note. Which journal entry is correct for company B on January 1, 2005?
(A)
DR Cash 10,000
DR Interest Expense 200
CR Notes Payable 10,000
CR interest payable 200
(B)
DR Cash 10,200
CR Notes Payable 10,200
(C)
DR Cash 10,000
CR Notes Payable 10,000
(D)
DR Notes receivable 10,000
CR Notes Payable 10,000
I have written the question exactly as I have it along with the 4 multiple choice answers. So, you must use one of the multiple choice to benefit me. I appreciate your help!
2 Answers
- jarantarLv 57 years ago
On Jan 1, 2005, an agreement was signed. You have not mentioned about any payment made by A. Hence, no entry was required on that day. Secondly, it appears that B had to pay 2000 as interest for 2 months @ 10% per month If you like to bring this agreement into books as on Jan 1, 2005, you may pass the following entries:
Dr. Loan Receivable 10000
Dr. Interest (Expense) 2000
Cr. Notes Payable 12000
You can pass the following entry when the cash is received:
Dr. Cash / Bank 10000
Cr. Loan receivable 10000
At the time of repayment, you can pass as below:
Dr. Notes Payable 12000
Cr. Cash / Bank 12000
- CocoLv 77 years ago
(A)
DR Cash 10,000
DR Interest Expense 200
CR Notes Payable 10,000
CR interest payable 200
