PROBLEM 8-1 (ACP)
Pittance Company provided the following information in connection with a bank loan.
March 1: Pittance Company borrowed ₱2,000,000 from bank on a 6 month note carrying an interest of 12% per annum. Accounts of ₱3,000,000 are pledged to secure the loan.
April 1: Pledged account of 1,000,000 are collected minus 2% discount.
June 1: the remaining pledged account are collected.
Sept. 1: the bank loan is repaid plus interest.
Required:
Prepare journal entries to record the transactions.
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Answer:
March 1
Debit- Cash = 2,000,000
Credit - Note Payable-Bank = 2,000,000
April 1
Debit - Cash = 980,000
Debit - Sales Discount = 20,000
Credit - Accounts Recievable = 1,000,000
June 1
Debit - Cash = 2,000,000
Credit - Accounts Receivable = 2,000,000
Sept. 1
Debit - Note payable-Bank = 2,000,000
Debit - Interest payable = (2,000,000*0.02) = 240,000
Credit - Cash = 2,240,000
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