Final answer:
To record the maturity of a note, Jackson would debit the Notes Payable account for the principal and the Interest Expense account for the interest accrued, and credit the Cash account for the total payment.
Step-by-step explanation:
When Jackson pays off a note on its maturity, the company needs to record the elimination of the liability represented by the note and also recognize any unpaid interest expense that has accrued. Assuming no year-end adjusting entry for interest was made, both the principal of the note and the total interest due for the entire term of the note need to be recorded at the time of payment.
The journal entry to record the payment would include a debit to the Notes Payable account for the principal amount of the note, a debit to Interest Expense for the total interest accrued over the life of the note, and a credit to Cash for the sum of the principal and interest, which is the total amount paid out.
An example journal entry if the note had a principal of $10,000 and accrued a total of $500 in interest would be:
- Debit Notes Payable $10,000
- Debit Interest Expense $500
- Credit Cash $10,500