How to work out question 10.8 a and b??
So for this, as payment is only made on 30 April and balance day is 30 June, then there would be some accrued interest between 1 May and 30 June i.e. 2 months accrued interest.
Therefore,
1. Calculate interest expense per annum = 24000*0.08 = 1920
2. See how many months have passed between the 1 November 2014 and 30 June 2015 = 8 months
3. Then times annual interest expense by 8/12 to get the amount incurred = 1920*8/12 = $1280
for part a
For part b you just need the general journal entry. Remember that accrued interest expense is a liability which increases on the credit side of the ledger. Also, since part of the annual interest expense has been paid off in cash then only the remaining 2 months left over is accrued.
So to calculate the accrued figure, work out how much is half a years payment and subtract that from the interest incurred for the entire year
This equals 1280 - 1920*0.5 = $320
Therefore, the journal entry is:
DR Interest Expense 1280
CR Accrued Interest Expense 320
CR Bank 960
Or you can do the bank entry separately and then instead just write out
DR Interest Expense 320
CR Accrued Interest Expense 320
Hope that makes sense,
James