Question

Bull City Industries is considering issuing a $100,000, 7% note to a creditor on account.

	Required:
a.	If the note is issued with a 45-day term, journalize the entries to record (refer to the company’s Chart of Accounts for exact wording of account titles): 1. the issuance of the note. 2. the payment of the note at maturity. Assume a 360-day year.
b.	If the note is issued with a 90-day term, journalize the entries to record (refer to the company’s Chart of Accounts for exact wording of account titles): 1. the issuance of the note. 2. the payment of the payment of the note at maturity. Assume a 360-day year. . a. If the note is issued with a 45-day term, journalize the entries to record (refer to the company’s Chart of Accounts for exact wording of account titles 1. the issuance of the note on January 1. 2. the payment of the note at maturity on February 15. Assume a 360-day year.

Answer 1

1a) Journal entry

Date	General Journal	Debit	Credit
	Account payable	100000
	Notes payable		100000
	(To record note)
	Notes payable	100000
	Interest expense (100000*7%*45/360)	875
	cash		100875
	(To record payment)

2a) Journal entry

Date	General Journal	Debit	Credit
	Account payable	100000
	Notes payable		100000
	(To record note)
	Notes payable	100000
	Interest expense (100000*7%*90/360)	1750
	cash		101750
	(To record payment)