Question

On November 1, 2018, Aviation Training Corp. borrows $46,000 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: Record the necessary entries in the Journal Entry.i. Record the issuance of note.ii. Record the adjustment for interest.iii. Record the repayment of the note at maturity.

Answer 1

Answer and Explanation:

The journal entries are shown below:

1. Cash $46,000

To Note payable $46,000

(Being the issuance of the note is recorded)

2. Interest expense ($46,000 × 6% × 2 months ÷ 12 months) $460

To interest payable $460

(Being the interest expense is recorded)

3. Note payable $46,000

Interest payable $460

Interest expense ($46,000 × 6% × 1 months ÷ 12 months ) $230

To cash $46,690

(Being the repayment of the note is recorded)