Question

 Keesha Co. borrows $115,000 cash on November 1 of the current year by signing a 120- day, 10%, $115,000 note.

 1. On what date does this note mature?

 2. & 3. What is the amount of interest expense in the current year and the following year from this note?

 4. Prepare journal entries to record (a) issuance of the note, (b) accrual of interest on December 31, and (c) payment of the note at maturity.

Answer 1

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Statement showing Computations
Particulars	Amount
1)
Note Maturity Date = Nov 01 + 29 days of November +31 days of December + 31 days of January + 28 days of February + 1 day of march	March 01
2)
Interest Expense Current year =115000*10%*60/360	1,916.67
3)
Interest Expense following year =115000*10%*60/360	1,916.67
4) Nov 01	Debit	Credit
Cash/ Bank DR	115,000.00
To Note payable		115,000.00
Dec 31
Interest expense DR	1,916.67
To Interest payable		1,916.67
March 01
Interest expense Dr	1,916.67
Interest payable Dr	1,916.67
Note payable Dr	115,000.00
To Cash/Bank		118,833.33