(Solved Homework): Please explain this and show each step…..

Please explain this and show each step..

On August 1, 2014 Y borrowed \$1,000,000 at 3%. Y pays interest every 6 months with interest payments every February 1 and August 1. Y will repay \$400,000 of the principal on August 1, 2015 and the remainder on February 1, 2016. Assume Y only makes AJEs every December 31 AND does NOT make reversing entries. Prepare the entries Y should make on:

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(Solved Homework): Please explain this and show each step…..
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a) August 1, 2014

b) December 31, 2014

c) February 1, 2015

d) August 1, 2015

e) December 31, 2015

f) February 1, 2016

JOURNAL ENTRIES :

 DATE ACCOUNTS & EXPLANATION DEBIT CREDIT 2014 Aug 1 Cash a/c 1000000 Loan payable a/c 1000000 (To record borrowed money) Dec 31 Interest expenses a/c (1000000*3%*5/12) 12500 Interest payable a/c 12500 (To record accured interest exp) 2015 Feb 1 Interest payable a/c 12500 Interest expenses a/c (1000000*3%*1/12) 2500 Cash a/c 15000 (To record interest paid) August 1 Interest expenses a/c (1000000*3%*6/12) 15000 Loan payable a/c 400000 Cash a/c 415000 (To record interest and part of loan paid) Dec 31 Interest expenses a/c (600000*3%*5/12) 7500 Interest payable a/c 7500 (To record accured interest exp) 2016 Feb 1 Loan payable a/c 600000 Interest payable a/c 7500 Interest expenses a/c (600000*3%*1/12) 1500 Cash a/c 609000 (To record interest and part of interest paid)

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