Question

A business issued a 120-day, 6% note for $10,000 to a creditor on account. The company uses a 360-day year for interest calculations. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity, including interest. ​ Description Debit Credit (a) (b)

Answer 1

Step-by-step explanation:

(a). The journal entry for issuance of note is shown below:

Accounts payable A/c Dr $10,000

To Notes Payable $10,000

(Being notes payable is issued)

(b). The journal entry for payment of the note at the time of maturity is shown below:

Notes Payable A/c Dr $10,000

Interest expense A/c Dr $200*

To Cash $10,200

(Being payment of note with interest is recorded)

* The computation of interest expense is shown below

= Issued amount × rate of interest × number of days ÷ total number of days

= $10,000 × 6% × 120/360

= $200