Question

A business issued a 30-day, 7% note for $84,000 to a creditor on account. The company uses a 360-day year for interest calculations. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note at maturity, including interest. If an amount box does not require an entry, leave it blank. When required, round your answers to the nearest dollar. a. b.

Answer 1

Answer:

Explanation:

The journal entries are shown below:

a. Accounts Payable A/c Dr $84,000

  To Note Payable $84,000

(Being issuance of the mortgage note payable is recorded)\

b. Interest Expense A/c Dr $490

Note Payable A/c Dr $84,000

                    To Cash A/c $84,490

(Being payment of the first installment is recorded)

The interest expense is computed below:

= Principal × rate of interest × number of days ÷ (total number of days in a year)  

= $84,000 × 7% × (30 days ÷ 360 days)

= $490