Online Accounting Course Simple Studies

Accountint Exercise 6.3 (Accounting for Advanced Accruals)

Discount notes.

Serf Consulting Company's number of clients has been growing with every day. However, Sert's office space was not big enough to keep up with the growing business. Sert decided to rent a larger office. To finance the new lease, on May 1, 20X8, the company issued a one-year, 5% discount note with a face value of $5,000.

At the beginning of 20X8, Serf Consulting Company had such ending balances of ledger accounts:

  • Cash - $600
  • Notes Payable - 0
  • Discount on Notes Payable - 0
  • Contributed Capital - $300
  • Retained Earnings - $300
  • Interest Expense - 0.

Required:

Provide journal entries and T-accounts that relate to the discount note for 20X8 and 20X9.