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17 February, 03:05

On April 12, Hong Company agrees to accept a 60-day, 10%, $6,100 note from Indigo Company to extend the due date on an overdue account. What is the journal entry needed to record the transaction by Indigo Company?

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  1. 17 February, 03:07
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    Since Notes payable is $6,100

    The interest would be = $6,100 * 10% * 60: 360

    = $101.67

    Total of interest + notes payable = $6100 + $101.67

    = $6201.67

    So, the journal entry would be

    Notes payable A/c Dr $6,100

    Interest Expense A/c Dr $101.67

    To Cash A/c $6201.67

    (Being notes payable is accepted)

    Since, notes is issued and interest is charged so both accounts is debit and cash is gone so it would be credited.
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