Prob 8-5

1 Land 1,000,000
Cash 100,000
Note payable 900,000

2 Interest expense 90,000

Accrued interest payable 90,000

3 Interest expense 99,000

Accrued interest payable 99,000

4 Note payable 900,000

Accrued interest payable 189,000
Cash 1,089,000

Prob 8-6
1 Machinery 750,000
Discount on note payable 250,000 Year
Cash 200,000
Note Payable 800,000 2020
2021
2 Note payable 200,000 2022
Cash 200,000 2023

3 Interest expense 100,000

Discount on note payable 100,000
 N/P Fraction Ammortization

800,000 8/20 100,000

600,000 6/20 75,000
400,000 4/20 50,000
200,000 2/20 25,000
2,000,000 250,000
Prob 8-9

REQ A
2020
1-Jan Accrued Interest Payable 252,000
Interest expense 252,000

Reversing entry for Accrued int. on Dec 31, 2019

(2,800,000 x 12% x 9/12)

1-Apr Interest expense (12% x 2,800,000) 336,000

Note payable - bank 700,000
Cash 1,036,000

1-Jul Cash 1,774,000

Discount on note payable 226,000
Note payable - shareholder 2,000,000

31-Dec Interest expense 189,000

Accrued interest payable (2,100,000 x 12% x 9/12) 189,000

31 Interest expense 113,000

Discount on note payable (226,000 x 1/2) 113,000

REQ B
Note payable - bank 700,000
Note payable - shareholder 2,000,000
Discount on note payable (113000) 1,887,000
Accrued interest payable 189,000
Total current liabilities 2,776,000

REQ C
Note payable - bank:
Jan 1 - Apr 1, 2020(2,800,00 x 12% x 3/12) 84,000
Apr 1 - Dec 31, 2020 (2,100,000 x 12% x 9/12) 189,000 273,000
Note payable - shareholder
Amortization of discount frm July 1 - Dec 31 (226 x 6/12) 113,000
Total interest expense 386,000