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6 July, 11:25

A business issued a 45-day note for $99,000 to a creditor on account. The note was discounted at 7%. Journalize the entries to record (a) the issuance of the note on March 1 and (b) the payment of the note at maturity. Assume a 360-day year.

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  1. 6 July, 11:39
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    The Journal entries are as follows:

    (i) Account payable A/c Dr. $99,000

    To notes payable $99,000

    (To record issue note payable)

    (ii) Notes payable A/c Dr. $99,000

    Interest Expense A/c Dr. $866

    To cash A/c $99,866

    (To record payment of note at maturity)

    Working Notes:

    Interest Expense = $99,000 * 7% * (45 : 360)

    = $99,000 * 7% * 0.125

    = $866
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