Question

Entries for Discounted Note Payable A business issued a 120-day note for $54,000 to a creditor on account. The note was discounted at 9%. Assume a 360-day year. a. Journalize the entry to record the issuance of the note. For a compound transaction, if an amount box does not require an entry, leave it blank. If necessary, round to one decimal place. a. b. Journalize the entry to record the payment of the note at maturity.

Answer 1

a. Journalize the entry to record the issuance of the note.

Dr Cash 52,380

Dr Interest expense 1,620

Cr Notes payable 54,000

interest expense = $54,000 x 9% x 120/360 = $1,620

b. Journalize the entry to record the payment of the note at maturity.

Dr Notes payable 54,000

Cr Cash 54,000

When the notes is paid, you have to credit cash for the full amount.