On April 1, 2013, Ringo Company borrowed $20,000 from its bank by using a 9%, 12 month note, with the interest to be paid on the maturity date.
Sorry about not being more descriptive. I need to find the maturity date, prepare a journal for it, and then find the reversing entry. If you can help me out, I would greatly appreciate it.
To find the maturity date of the note, we need to calculate 12 months from April 1, 2013. To do this, we can add 12 months to the given date.
- Start with the given date: April 1, 2013
- Add 12 months: April 1, 2013 + 12 months = April 1, 2014
So, the maturity date of the note is April 1, 2014.
Now, let's prepare the journal entry to record the borrowing of $20,000 on April 1, 2013:
1. On April 1, 2013, the journal entry is:
Debit: Cash (or Bank) $20,000
Credit: Notes Payable $20,000
This entry records the increase in cash or bank account and the liability of the company to pay back the borrowed amount.
Finally, let's find the reversing entry, which is typically recorded at the beginning of the next accounting period to reverse the accrual.
2. On April 2, 2013 (beginning of the next accounting period), the reversing entry is:
Debit: Interest Expense $ (20,000 x 9%)
Credit: Interest Payable $ (20,000 x 9%)
This entry reverses the accrued interest expense and interest payable.
Please note that the interest amount in the reversing entry is calculated by multiplying the borrowed amount ($20,000) by the interest rate (9%). The interest expense is debited, and interest payable is credited to reverse the accrual.
Remember to consult with an accounting professional or refer to your company's specific accounting policies and guidelines for accurate and customized entries in your books.