ACCT2241 – Introductory Financial Accounting - Fall 2011
Assignment #8
(due Saturday, November 19, 2011 at 10:00PM)

Instructions: 1. Your assignment must be completed in Word or Excel and saved using the filename: yourlastnamefirstinitial_HW8 (i.e., SmithJ_HW8) 2. This is an individual assignment. While you may discuss concepts from this assignment with your classmates, please remember that it is expected that the assignment will be completed and submitted on an individual basis. 3. Assignment must be submitted via Blackboard. Late submissions will NOT be accepted.

Question 1:
On May 1, 2011, XYZ Corp. borrows $50,000 from its bank and signs a promissory note to repay it in 18 months at the interest of 9% per annum. Although no principal payments are to be made until the note matures in 18 months, the interest on the note is to be paid every 6 months. The company’s fiscal year end is December 31.

Required:
(1) Prepare the journal entries that would be made during 2011 to record the issuance of the note and the first interest payment. Please indicate dates for each journal entry.
(2) Would an adjusting entry related to this note be required on December 31, 2011? If so, prepare a journal entry.
(3) How much interest expense would be reported on the XYZ Corp’s income statement for the year ended December 31, 2011?
(4) What liabilities would be reported on the XYZ Corp’s December 31, 2011, balance sheet related to this loan? Please specify the accounts, amounts, and how would they be classified.
(5) Prepare the journal entries that would be made during 2012 to record the second interest payment and the third interest payment, and the repayment of the principal when the note matures. Please indicate dates for each journal entry.
(6) How much interest expense would be reported on the XYZ Corp.’s income statement for the year ended