Question

On November 1, 2021, Aviation Training Corp. borrows $46,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 6% note payable. Interest is payable at maturity. Aviation’s year-end is December 31.
Required: 1., 2. & 3. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal Entry Worksheet
Record the issuance of note.
Record the adjustment for interest.
Record the repayment of the note at maturity

Date General Journal Debit Credit

Answer 1

Answer:

Record the issuance of note.

November 1, 2021

Dr.   Cash                   46000

Cr.   Note Payable     46000

Record the adjustment for interest.

December 31, 2021

Dr.   Interest Expense    460

Cr.   Interest Payable     460

(46000*6%)*3/12 = 460

Record the repayment of the note at maturity

Dr.   Note Payable     46000

Dr.   Interest Payable     460

Dr.   Interest Expense    230

Cr.   Cash                    46,690

(46000*6%)*1/12 = 230

Explanation:

* At the year end the interest expense is accrued and recorded as interest payable.