Question

Moss County Bank agrees to lend the Crane Company $515000 on January 1. Crane Company signs a $515000, 6%, 9-month note. What entry will Crane Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?

A-

Notes Payable 515000
Interest Payable 23175
Cash 538175
B-

Interest Payable 15450
Notes Payable 515000
Interest Expense 7725
Cash 538175
C-

Notes Payable 538175
Cash 538175
D-

Interest Expense 23175
Notes Payable 515000
Cash 538175

Answer 1

Crane Company

The entry that Crane Company will make to pay off the note and interest at maturity assuming that interest has been accrued to September 30 is:

D-

Interest Expense 23,175

Notes Payable 515,000

Cash 538,175

Step-by-step explanation:

a) Data and Calculations:

Notes payable = $515,000

Interest rate = 6% per annum

Interest expense for nine months = $23,175 ($515,000 * 6% * 9/12)

b) Interest Expense and Notes Payable will be debited with $23,175 and $515,000 while the Cash Account will be credited with $538,185. The cash account entry pays off the note payable with interest for nine months.