@ 2012, Cengage Learning Current Liabilities and Payroll LO 1a – Recording Notes Payable.

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@ 2012, Cengage Learning Current Liabilities and Payroll LO 1a – Recording Notes Payable

Current Liabilities  Long-term liabilities are debts due beyond one year.  Current liabilities are debts that will be paid out of current assets and are due within one year. LO 1

Short-Term Notes Payable Nature’s Sunshine Company issues a 90-day, 12% note for $1,000, dated August 1, 2011, to Murray Co. for a $1,000 overdue account. LO 1

Short-Term Notes Payable When the note matures, the entry to record the payment of $1,000 plus $30 interest ($1,000 * 12% * 90 / 360) is as follows: LO 1 Interest Expense appears on the income statement as an “Other Expense.”

On May 1, Bowden Co. (borrower) purchased merchandise on account from Coker Co. (creditor), $10,000, 2/10, n/30. The merchandise cost Coker Co. $7,500. Short-Term Notes Payable LO 1

DescriptionDebitCredit Bowden Co. (Borrower) Mdse. Inventory10,000 Accounts Payable10,000 Coker Co. (Creditor) DescriptionDebitCredit Accounts Receivable10,000 Sales10,000 Cost of Mdse. Sold7,500 Mdse. Inventory7,500 Short-Term Notes Payable LO 1

Short-Term Notes Payable LO 1 On May 31, Bowden Co. issued a 60-day, 12% note for $10,000 to Coker Co. on account.

Short-Term Notes Payable LO 1 Accounts Payable10,000 Notes Payable10,000 DescriptionDebitCredit Bowden Co. (Borrower) Notes Receivable10,000 Accounts Receivable10,000 Coker Co. (Creditor) DescriptionDebitCredit

Short-Term Notes Payable LO 1 On July 30, Bowden Co. paid Coker Co. the amount due on the note of May 31, the face amount of $10,000 plus interest of $200 ($10,000 * 12% * 60 / 360).

Short-Term Notes Payable LO 1 Notes Payable10,000 Interest Expense200 Cash10,200 DescriptionDebitCredit Bowden Co. (Borrower) Cash10,200 Interest Revenue 200 Notes Receivable10,000 Coker Co. (Creditor) DescriptionDebitCredit

Short-Term Notes Payable LO 1 Notes Payable10,000 Interest Expense200 Cash10,200 DescriptionDebitCredit Bowden Co. (Borrower) Cash10,200 Interest Revenue 200 Notes Receivable10,000 Coker Co. (Creditor) DescriptionDebitCredit $10,000 * 12% * 60 / 360

Short-Term Notes Payable LO 1 Notes Payable10,000 Interest Expense200 Cash10,200 DescriptionDebitCredit Bowden Co. (Borrower) Cash10,200 Interest Revenue 200 Notes Receivable10,000 Coker Co. (Creditor) DescriptionDebitCredit $10,000 * 12% * 60 / 360 * 60 / 360 $10,000 * 12% * 60 / 360 * 60 / 360

Short-Term Notes Payable LO 1 On September 19, Iceburg Company borrowed cash from First National Bank by issuing a $4,000, 90-day, 15% note to the bank.

Short-Term Notes Payable LO 1 On December 18, Iceburg Company paid First National Bank $4,000 plus interest of $150 ($4,000 * 15% * 90 / 360).