Asked by Ledee Martinez on May 09, 2024
Verified
On January 1, Luther Co. issued a $1,000,000, five-year, 8% installment note payable with payments of $250,456 principal plus interest due on January 1 of each year for the next five years.?
(a) Prepare the adjusting journal entry at December 31 to accrue interest for the year.?
(b) Show the account (s) and amount (s) and where it (they) will appear on a multi-step income statement prepared onDecember 31.?
(c) Show the account (s) and amount (s) and where it (they) will appear on a classified balance sheet prepared onDecember 31.
Installment Note Payable
A liability that represents a loan that is repaid in regular payments over a set period of time.
Accrue Interest
The process of recognizing interest income or expense that has been earned or incurred but not yet received or paid.
Multi-step Income Statement
An income statement that segregates total revenues and expenses into operating and non-operating categories, providing a detailed view of a company's financial performance.
- Master the core principles and workflows associated with the creation of bonds, including the mechanics of interest payment and the diminishment of bond discounts and premiums over time.
- Investigate and expound upon bond-specific data within balance sheets and income statements.
Verified Answer
EA
Eiman AlshamMay 12, 2024
Final Answer :
(a) Interest Expense 80,000Interest Payable 80,000
(b) Interest Expense = $80,000 reported as "Other expense"
(c)Current liabilities:Interest Payable, $80,000Notes Payable-Current Portion, $170,456Long-term liabilities:Notes Payable, $829,544
(b) Interest Expense = $80,000 reported as "Other expense"
(c)Current liabilities:Interest Payable, $80,000Notes Payable-Current Portion, $170,456Long-term liabilities:Notes Payable, $829,544
Learning Objectives
- Master the core principles and workflows associated with the creation of bonds, including the mechanics of interest payment and the diminishment of bond discounts and premiums over time.
- Investigate and expound upon bond-specific data within balance sheets and income statements.