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Journal Entries

23. Gray County Bank agrees to lend the Starkwood Building Company $100,000 on January 1. Starkwood Building Company signs a $100,000, 9%, 9-month note. The entry made by Starkwood Building Company on January 1 to record the proceeds and issuance of the note is: _________.

a)Interest Expense 9,000
Cash 91,000
Notes Payable 100,000

b) Cash 100,000
Notes Payable 100,000

c) Cash 100,000
Interest Expense 9,000
Notes Payable 109,000

d) Cash 100,000
Interest Expense 9,000
Notes Payable 109,000
Interest Payable 4,500

24. The journal entry to record the conversion of a $250 accounts payable to a notes payable would be:

Jan 31 Cash 250
Notes Payable 250

Jan 31 Notes Receivable 250
Notes Payable 250

Jan 31 Notes Payable 250
Cash 250

Jan 31 Accounts Payable 250
Notes Payable 250

Solution Preview

The correct answer for 23 is (b). Interest is recorded when it is ...

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