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On 31 March 2015, one-quarter of the 8% loan notes were redeemed at par and six months’ outstanding loan
interest was paid. The suspense account represents the double entry corresponding to the cash payment for the
capital redemption and the outstanding interest.And what is it that you don’t understand?
When one quarter of the loan note was redeemed at par, that involved paying cash of $5,000
A full year’s loan note interest was 8% x $20,000 = $1,600 and, according to the trial balance, $800 has been paid during the year so $800 was still outstanding
The payment of $5,800 (incorrectly debited to the Suspense Account) is made up of the $5,000 loan note repayment + half a year’s loan note interest
OK?
Try to be a little bit more specific about your queries
Even now I can only assume that I have answered your needs – because you never specified what it was that you wanted to have explained!
OK?
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