Question

Samson Corporation issued a 4-year, $75,000, zero-interest-bearing note to Brown Company on January 1, 2020, and received cash of $47,664. The implicit interest rate is 12%.

Prepare Samson’s journal entries for:
(a) the January 1 issuance and (b) the December 31 recognition of interest.

Answer 1

Samson’s journal entries for:

(a) The January 1 issuance of Note payable

Dr. Cash 47,664

Cr. Note Payable 47,664

(b) The December 31 recognition of interest

Dr. Interest Expense 5,720

Cr. Interest Payable 5,720

Step-by-step explanation:

Interest Calculation for the year

47,664 X 12% = 5,720