Question

On June 1, Sawyer Co. borrowed $5,000 cash from Crystal Bank by signing a 45-day, 12% interest-bearing note. On July 16, Sawyer pays the amount due in full. Sawyer would record this payment with a (debit/credit) _______ to Interest Expense in the amount of _______.

Answer 1

Debit $75

Hope this helps! good luck :)

Answer 2

Debit $75

Explanation:

Data provided as per the question

Borrowed cash = $5,000

Per day signing = 45

Interest bearing = 12%

The computation of given question is below:-

Interest Expense = Borrowed cash × Interest bearing × Per day signing ÷ 360

= $5000 × 12% × 45 ÷ 360

= $5000 × 12% × 0.125

= $5000 × 0.12 × 0.125

= $75