Question

On November 1, 2018, Aviation Training Corp. borrows $49,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 6% note payable. Interest is payable at maturity. Aviation’s year-end is December 31. Required: 1., 2. & 3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

1. Issuance of note

Cash A/c Dr. $49,000

To note payable $49,000

2. Adjustment for interest

Interest expense ($49,000 × 6% × 2/12) Dr. $490

To interest payable $490

3. Repayment of note

Note payable A/c Dr. $49,000

Interest payable A/c Dr. $490

Interest expense A/c ($49,000×6%×1/12) Dr. $245

To cash $49,735