Chapter 10 Practice Problems Notes Payable in exchange for cash: 1) Prepare the journal entry for the issuance of the note payable. 2) Calculate the maturity date. 3) Calculate the maturity value. 4) Prepare the journal entry for payment of the note at the maturity date. Problem #1 Notes Payable in exchange for Cash Mar 16, ABC Company borrowed $115,250 from Bank of America, issuing a 180-day, 3.125% note. DATE ACCOUNTS DR CR DATE ACCOUNTS DR CR Exchanging an Account for a Note Payable: 1) Prepare the journal entry for the issuance of the note payable. 2) Calculate the maturity date. 3) Calculate the maturity value. 4) Prepare the journal entry for payment of the note at the maturity date. Problem #2 [Exchanging Accounts Payable for Note Payable] Sept 21, purchased merchandise on account from XYZ Company, $80,000, terms, n/30. DATE ACCOUNTS DR CR Oct 21, issued a 45-day 5% note for $80,000 to XYZ Company on account. DATE ACCOUNTS DR CR DATE ACCOUNTS DR CR Discounted Notes: Interest is paid up front 1) Prepare the journal entry for the issuance of the note payable. 2) Calculate the maturity date. 3) Calculate the maturity value. 4) Prepare the journal entry for payment of the note at the maturity date. Problem #3 [Discounted Note - Interest is paid up front] Sept 2, purchased equipment by issuing a $300,000, 60-day note to XYZ Company, which discounted the note at the rate of 6%. DATE ACCOUNTS DR CR DATE ACCOUNTS DR CR Problem #4 - Installment Notes 1) Prepare the journal entry for the issuance of the note payable. 2) Calculate the interest expense & note payable amount due in Year 1. 3) Prepare the journal entry for the first payment in Year 1. 4) Calculate the ending note payable balance. 5) Prepare the journal entries for Year 2 6) Calculate the interest expense & note payable amount due in Year 2. 7) Calculate the ending note payable balance. The Table below includes information related to an installment note issued for cash on January 1, 2018. Principal Amount $ 24,000 Interest Rate 6% Term of Note 5 years Annual Payments (includes principal & interest) $ 5,698 Year 1 Date Accounts Dr Cr To record the receipt of cash in exchange for a note. Calculation of Interest expense: Calculation of Notes payable: Year 1 Date Accounts Dr Cr To record the first payment on the installment note. Calculation of Ending Note Payable Balance: Year 2 Calculations & Journal Entries Calculation of Interest expense for Year 2: Calculation of Notes payable: Year 2 Date Accounts Dr Cr To record the second installment payment. Calculation of Ending Note Payable Balance