Larry Sims owns Sims Auto Sales. He periodically borrows money from Biloxi State Bank. He permits some
Question:
Larry Sims owns Sims Auto Sales. He periodically borrows money from Biloxi State Bank. He permits some customers to sign short-term notes for their purchases. He usually discounts these notes at the bank. Following are selected transactions that occurred in March 2016. (2016 is a leap year.)
INSTRUCTIONS
1. Record each of the March transactions in the general journal. (Omit explanations.)
2. Record the additional data related to these notes for months other than March in the general journal using the appropriate dates.
DATE...........TRANSACTIONS
2016
Mar. 4 Mr. Sims borrows $20,000 from the bank on a note payable for the business. Terms of the note are 8 percent interest for 45 days.
11 A 90-day $18,000 note payable to the bank is discounted at a rate of 10 percent.
22 Sold a car to Bridgett Wilson for $13,000 on a 75-day note receivable, bearing interest at 10 percent.
23 Discounted the Wilson note with the bank. The bank charges a discount rate of 12 percent.
25 Sold a car for $15,000 to Derrick Wells. Wells paid $2,000 cash and signed a 30-day note, bearing interest at 10 percent, for the balance.
28 Terry Owens's account receivable is overdue. Sims requires him to sign a 12 percent, 30-day note for the balance of $5,500.
Additional Data
a. Sims pays all the company's notes payable on time.
b. Bridgett Wilson defaults on her $13,000 note and the bank charges the company's checking account for the maturity value of the note and a service fee of $30.
c. Derrick Wells pays his note on time.
d. Terry Owens pays his note on time.
Analyze: What is the Notes Payable account balance on March 25?
Discount RateDepending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
Step by Step Answer:
College Accounting Chapters 1-30
ISBN: 978-0077862398
14th edition
Authors: John Price, M. David Haddock, Michael Farina