Question

A business issued a 90-day, 5% 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.

If an amount box does not require an entry, leave it blank or enter 0. When required, round your answers to the nearest dollar.

Answer 1

Answer and Explanation:

The journal entries are shown below:

Accounts Payable $10,000

To Notes payable $10,000

(Being the issuance of the note is recorded)

Interest expense $125 ($10,000 × 5% × 90 days ÷ 360 days)

Notes payable $10,000

To Cash $10,125

(Being the cash paid is recorded)

These two entries should be recorded for the given transaction