Reference no: EM132476059

Jesse Company adjusts its accounts monthly and closes its accounts on December 31. On October 31, year 1, Jesse Company signed a note payable and borrowed $120,000 from a bank for a period of six months at an annual interest rate of 6 percent.

Question a. How much is the total interest expense over the life of the note? How much is the monthly interest expense? (Assume equal amounts of interest expense each month.)

Question b. In the company's annual balance sheet at December 31, year 1, what is the amount of the liability to the bank?

Question c. & d. Prepare the journal entry to record issuance of the note payable on October 31, year 1 and the adjusting entry to accrue interest on the note at December 31, year 1.

Question e. Assume the company prepared a balance sheet at March 31, year 2. State the amount of the liability to the bank at this date.

1. Among the ledger accounts used by Rapid Speedway are the following: Prepaid Rent, Rent Expense, Unearned Admissions Revenue, Admissions Revenue, Prepaid Printing, Printing Expense, Concessions Receivable, and Concessions Revenue. For each of the following items, provide the journal entry (if one is needed) to record the initial transaction and provide the adjusting entry, if any, required on May 31, assuming the company makes adjusting entries monthly.

a. On May 1, borrowed $330,000 cash from National Bank by issuing a 9 percent note payable due in three months.

b. On May 1, paid rent for six months beginning May 1 at $34,000 per month.

c. On May 2, sold season tickets for a total of $890,000 cash. The season includes 60 racing days: 15 in May, 20 in June, and 25 in July.

d. On May 4, an agreement was reached with Snack-Bars, Inc., allowing that company to sell refreshments at the track in return for 10 percent of the gross receipts from refreshment sales.