Notes and loans: journal entry worksheet
Name: Date:
Convention: United States (US textbooks)
Record each transaction as a journal entry: write each account in the Debit or the Credit column with its amount.
Accepting a customer’s note for an open account
A customer owes the company $4,500.00 for goods sold on account last month. To get more time, the customer signs a 90-day promissory note for the full amount.
Assumptions: Interest on the note is recorded when it is earned, not today.
Accounts to choose from: Interest Revenue · Notes Receivable · Sales Revenue · Notes Payable · Accounts Receivable · Cash
Account Debit Credit Collecting a note with interest
Today a customer pays in cash its 4-month, 9% note for $9,600.00, together with the interest due.
Assumptions: The note was received and is collected in the same year: no interest has been recorded on it before. Interest is computed in whole months: principal × rate × months / 12.
Accounts to choose from: Notes Payable · Accounts Receivable · Cash · Interest Revenue · Interest Expense · Notes Receivable · Interest Receivable
Account Debit Credit Giving a supplier a note for an open account
The company owes a supplier $6,800.00 for goods bought on account last month. Instead of paying now, it signs a 60-day promissory note for the full amount.
Assumptions: Interest on the note is recorded when it is incurred, not today.
Accounts to choose from: Cash · Interest Expense · Inventory · Accounts Payable · Notes Receivable · Notes Payable
Account Debit Credit Paying a note with interest at maturity
At maturity the company pays by check its 6-month, 5% note payable for $14,400.00, together with the interest due.
Assumptions: The note was issued and is paid in the same year: no interest has been recorded on it before. Interest is computed in whole months: principal × rate × months / 12.
Accounts to choose from: Interest Expense · Interest Revenue · Notes Receivable · Accounts Payable · Cash · Interest Payable · Notes Payable
Account Debit Credit A customer dishonors a note
A customer’s 3-month, 10% note for $8,400.00 falls due today, and the customer dishonors it (does not pay).
Assumptions: The company still expects to collect, so it charges the customer the principal and the interest due. No interest has been recorded on this note before. Interest is computed in whole months: principal × rate × months / 12.
Accounts to choose from: Interest Receivable · Notes Payable · Sales Revenue · Interest Revenue · Accounts Receivable · Cash · Notes Receivable
Account Debit Credit Receiving a bank loan net of an arrangement fee
The company borrows $60,000.00 from its bank on a three-year note, repayable in full at maturity. The bank deducts a loan fee of $900.00 and deposits the rest in the company’s checking account today.
Assumptions: Debt issuance costs are deducted from the carrying amount of the note (ASC 835-30): the note is recorded at the net amount received.
Accounts to choose from: Interest Expense · Notes Receivable · Accounts Payable · Cash · Bank Service Charges · Notes Payable
Account Debit Credit Paying a loan installment: splitting interest and principal
The company pays the monthly installment of $1,500.00 on its bank loan (a note payable) by check. Before this payment the outstanding principal was $48,000.00. The bank charges interest at 6% per year on the outstanding principal, for one month; the rest of the installment repays principal.
Assumptions: No interest has been accrued for this month before the payment.
Accounts to choose from: Cash · Accounts Payable · Interest Revenue · Interest Payable · Notes Payable · Bank Service Charges · Interest Expense
Account Debit Credit Accruing interest on a note payable at year end
The company issued a six-month, 7% note payable for $18,000.00 to a supplier 2 months before December 31. Principal and interest are due at maturity. Record the interest accrued at December 31.
Assumptions: Nothing has been recorded for the interest yet. Interest is computed in whole months: principal × rate × months / 12.
Accounts to choose from: Interest Expense · Accounts Payable · Cash · Interest Payable · Interest Receivable · Notes Payable
Account Debit Credit Lending cash to an employee
The company lends $1,200.00 in cash to an employee. The loan carries no interest and will be deducted from her salary in equal parts over the next 6 months.
Assumptions: The employee signs no promissory note. The loan is not an advance on salary already earned.
Accounts to choose from: Salaries Payable · Salaries Expense · Accounts Receivable · Cash · Loans to Employees · Notes Receivable
Account Debit Credit Repaying a bank overdraft
The company has an overdraft line with its bank, kept separate from its checking account. Today it repays the $3,800.00 owed on that line with a payment from its checking account.
Assumptions: The amount drawn is a short-term debt to the bank. Interest on it has already been paid and recorded.
Accounts to choose from: Notes Receivable · Accounts Payable · Bank Service Charges · Bank Overdraft · Interest Expense · Cash
Account Debit Credit
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