Chapter 10 – Summary
Notes payable
Recording notes payable
Borrowing $10,000 for 6 months at 9% interest per year on November 1st
- Cash debit for $10,000
- Notes payable credit for $10,000
Recording interest expense accrued by December 31st
Interest expenses: $10,000 x 9% x 2/12 = $150
- Interest expense debit for $150
- Interest payable credit $150
Record payment on May 1st (maturity date)
Interest expense: $10,000 x 9% x 4/12 = $300
- Note payable debit for $10,000
- Interest payable debit $150
- Interest expense $300
- Cash credit for $10,450
Amortization table
Page 439
Bonds payable
$1,000,000 bond payable for 20 years at 6%. Dated March 1, 2015. Interest is payable semi-
annually (September 1 and March 1)
Entry at issuance date
- Cash debit for $1,000,000
- Bonds payable credit $1,000,000
First semi-annual payment
Semi-annual interest: $1,000,000 x 6% x ½ = $30,000
- Bond interest expense debit for $30,000
- Cash credit for $30,000
Four months’ interest accrued on September 1.
Bond interest payable: $1,000,000 x 6% x 4/12 = $20,000
- Bond interest expense debit $20,000
- Bond interest payable credit for $20,000
Notes payable
Recording notes payable
Borrowing $10,000 for 6 months at 9% interest per year on November 1st
- Cash debit for $10,000
- Notes payable credit for $10,000
Recording interest expense accrued by December 31st
Interest expenses: $10,000 x 9% x 2/12 = $150
- Interest expense debit for $150
- Interest payable credit $150
Record payment on May 1st (maturity date)
Interest expense: $10,000 x 9% x 4/12 = $300
- Note payable debit for $10,000
- Interest payable debit $150
- Interest expense $300
- Cash credit for $10,450
Amortization table
Page 439
Bonds payable
$1,000,000 bond payable for 20 years at 6%. Dated March 1, 2015. Interest is payable semi-
annually (September 1 and March 1)
Entry at issuance date
- Cash debit for $1,000,000
- Bonds payable credit $1,000,000
First semi-annual payment
Semi-annual interest: $1,000,000 x 6% x ½ = $30,000
- Bond interest expense debit for $30,000
- Cash credit for $30,000
Four months’ interest accrued on September 1.
Bond interest payable: $1,000,000 x 6% x 4/12 = $20,000
- Bond interest expense debit $20,000
- Bond interest payable credit for $20,000
