Chapter 3: Q14Q (page 127)

Midwest Enterprises made the following entry on December 31, 2017.
Interest Expense 10,000
Interest Payable 10,000
(To record interest expensedue on loan from Anaheim
National Bank)
What entry would Anaheim National Bank make regarding its outstanding loan to Midwest Enterprises? Explain why this must be the case.

Short Answer

Expert verified

The interest revenue is debited by $10,000 and the interest revenue is credited by $10,000 to record the interest receivable paid.

As the National Bank ought to receive interest on the loan, therefore it is a current asset as well as income.

Step by step solution

Meaning of interest expense

Interest expense is a non-operating expense presented on the income statement. It is considered as the cost undertaken by the business enterprise for the funds borrowed.

Entry made by Anaheim National Bank in association with outstanding loan and explanation for it

Date	Account title and explanation	Debit	Credit
December 31	Interest receivable	10,000
	To Interest revenue		10,000
	(To record accrued interest revenue on loan)

Accrued expenses are obtained from the similar sources as accrued revenues. Actually, an accrued expense on the accounts of acompany is like an accrued revenue to the other.

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JURASSIC PARK CO. Worksheet (PARTIAL) For The Month Ended Jan. 31, 2017
	Trial Balance		Adjustment		Adjusted trial balance
Account Titles	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
Supplies	3,256			a) 1,500	1,756
Accumulated Depreciation—Equipment		6,682		(b) 257		6,939
Interest Payable				(c) 50		150
Supplies Expense			(a) 1,500		1,500
Depreciation Expense			(b) 257		257
Interest Expense			(c) 50		50

ED BRADLEY CO. Worksheet (PARTIAL) For The Month Ended April 30, 2017
	Adjusted Trial Balance		Income Statement		Balance Sheet
Account Titles	Dr.	Cr.	Dr.	Cr.	Dr.	Cr.
Cash	18,972
Accounts Receivable	6,920
Prepaid Rent	2,280
Equipment	18,050
Accumulated Depreciation—Equipment		4,895
Notes Payable		5,700
Accounts Payable		4,472
Common Stock		34,960
Retained Earnings—April 1, 2017		1,000
Dividends	6,650
Service Revenue		12,590
Salaries and Wages Expense	6,840
Rent Expense	3,760
Depreciation Expense	145
Interest Expense	83
Interest Payable		83

Short Answer

Step by step solution

Meaning of interest expense

Entry made by Anaheim National Bank in association with outstanding loan and explanation for it

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