Prepare the entry for the initial borrowing and the

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Reference no: EM13601258

On May 15, Gruzik's Outback Clothiers borrowed some money on a 4-month note to provide cash during the slow season of the year. The interest rate on the note was 8%. At the time the note was due, the amount of interest owed was $410.

(a) Determine the amount borrowed by Gruzik.

(b) Assume the amount borrowed was $19,920. What was the interest rate if the amount of interest owed was $570? (Round to 1 decimal place, e.g. 2.5.)

(c) Prepare the entry for the initial borrowing and the repayment for the facts in the first part of the question. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Initial Borrowing
Date Account/Description Debit Credit
May 15 Accounts receivableSalesNotes PayableInterest payableInterest expenseSales tax payableCash
Accounts receivableInterest expenseInterest payableCashNotes payableSales tax payableSales

Repayment
Date Account/Description Debit Credit
Sept. 15 SalesAccounts receivableInterest payableInterest expenseNotes payableCashSales tax payable
Notes payableAccounts receivableSales tax payableInterest payableSalesInterest expenseCash
CashSales tax payableSalesInterest expenseInterest payableAccounts receivableNotes payable

Reference no: EM13601258

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