CHAPTER 8 NOTES PAYABLE

School: University of the City of Pasig (Pamantasan ng Lungsod ng Pasig) - Course: BSA 102 - Subject: Accounting

CHAPTER 8: NOTES PAYABLE PROBLEMS Problem 8-1 (IAA) Ontario Company, a natural energy supplier, borrowed P8,000,000 cash on November 1, 2021 to fund a geological survey. The loan was granted by United Bank under a short-term credit line. Ontario Company issued a 9-month, 12% promissory note with interest payable at maturity. The fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of the note payable by Ontario Company. 2. Prepare the appropriate adjusting entry for the note payable on December 31, 2021. 3. Prepare the journal entry for the payment of the note payable at maturity. Problem 8-2 (IAA) On October 1, 2021, Home Company issued to Security Bank a P6,000,000, 8-month, noninterest-bearing note. The note payable was discounted by the bank at 12%. Required: 1.Prepare the appropriate journal entry by Home Company to record the issuance of the note. 2.Prepare the adjusting entry on December 31, 2021. 3.Present the note payable on December 31, 2021. 4.Prepare the journal entry to record the discount amortization and payment of the note payable on June 1, 2022, date of maturity. 5.Prepare the journal entry to record the following assuming the note had been structured as a 12% note with interest and principal payable at maturity: a. Issuance of the note payable on October 1, 2021 b. Accrued interest payable on December 31, 2021 c. Payment of the note payable on the date of maturity Problem 8-3 (IAA) On September 1, 2021, Trinoma Entertainment borrowed P24,000,000 cash to fund a new Fun Park. The loan was granted by Solid Bank under a noncommitted short-term line of credit arrangement.

Trinoma issued a 9-month, 12% promissory note. Interest was payable at maturity. The fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of the note by Trinoma. 2. Prepare the appropriate adjusting entry for the note on December 31, 2021. 3. Prepare the journal entry for the payment of the note at maturity. Problem 8-4 (IAA) Rose Company provided the following selected transactions related to liabilities: 2021 Feb. 1 Negotiated a revolving credit agreement with Second Bank which can be renewed annually upon bank approval. The amount available under the line of credit is P30,000,000 at the prime bank rate. April 1 Arranged a 3-month bank loan of P12,000,000 with Second Bank under the line of credit agreement. Interest at the prime rate of 8% was payable at maturity. July 1Paid the 8% note at maturity. Nov. 1 Supported by the credit line, Rose Company issued P20,000,000 of commercial paper on a nine-month note. Interest was discounted at issuance at a 6% discount rate. Dec. 31 Recorded any necessary adjusting entry.