You company borrows $80,000 ca
January 18th, 2023
You company borrows $80,000 cash on December 1, by signing a 120day, 8% note, with a face value of $80,000. Answer the followingquestions and record the transactions noted.
Record the issuance of the note on December 1.
Calculate and record the journal entry for interest required onDecember 31st.
Record the payment of interest and principal at maturity.
Answer:
| WorkingNotes: | |||||
| CALCULATION OF TOTAL INTEREST ANDINTEREST RECOGNISED AS ON DECEMBER 31 & AT MATURITY | |||||
| Interest Expenses At December31 | Interest Expenses AtMaturity | Total Interest | |||
| Principal value of note | $ 80,000 | $ 80,000 | $ 80,000 | ||
| Rate % | 8% | 8% | 8% | ||
| Time | 30 Days | 6 Month | 12 Month | ||
| Total Interest | $ 533 | $ 1,600 | $ 2,133.33 | ||
| Number of days in year is taken 360Days | |||||
| Solution: | |||||
| JournalEntries | |||||
| Date | ACCT Title andexplanation | Debit | Credit | ||
| Dec, 01 | Cash | $ 80,000 | |||
| Note Payable | $ 80,000 | ||||
| (To record the issue of note @ 8%) | |||||
| Dec 31, | Interest Expenses | $ 533 | |||
| Interest Payable | $ 533 | ||||
| (To record the interest expenses ofDec 31) | |||||
| April, 30 | Interest Expenses | $ 1,600 | |||
| Interest Payable | $ 533 | ||||
| Note Payable | $ 80,000 | ||||
| Cash | $ 82,133 | ||||
| (To record the payment of note withinterest) | |||||
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