Question

On December 15, 2015, Carboy, Inc., borrows $120,000 cash from Third National Bank at 9 percent annual interest. The note is due in 45 days. At December 31, 2015, Carboy records any unpaid interest with an adjusting entry. On January 30, 2016, Carboy pays the principal and interest owed on the bank note.Prepare the January 30 entry by Carboy for the payment (maturity) of the note plus interest by selecting the account names and dollar amounts from the drop-down menus. (Note that the account names must follow the order in the illustration in the text.)

Answer 1

Answer:

December 15, 2015, bank loan is received

Dr Cash 120,000

    Cr Notes payable 120,000

December 31, 2015, adjusting entry for accrued interests payable ($120,000 x 9% x 15/360)

Dr Interest expense 450

    Cr interest payable 450

January 30,2016, loan is paid back to the back along with interests

Dr Interest expense 900

Dr Notes payable 120,000

Dr Interest payable 450

    Cr Cash 121,350