Exercise 9-4 Interest-bearing notes payable with year-end adjustments LO P

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Exercise 9-4 Interest-bearing notes payable with year-end adjustments LO P

Keesha Co. borrows $160,000 cash on November 1, 2017, by signing a 120-day, 8% note with a face value of $160,000. 1. On what date does this note mature? (Assume that February has 28 days)

March 27, 2018.

March 28, 2018.

March 29, 2018.

March 30, 2018.

*March 01, 2018

2.& 3. What is the amount of Interest expense in 2017 and 2018 from this note? (Use 360 days a year. Round-final answers to the nearest whole dollar.)

4. Prepare journal entries to record (a) issuance of the note, (b) accrual of Interest at the end of 2017, and (c) payment of the t maturity. (Assume no reversing entries are made.) (Use 360 days a year. Do not round Intermedlate calculations.)

business accounting

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Answer 1

Answer #1

2)Interest expense for 2018= Note payable * rate * n/ 360

= 160000 * .08*60/360

= 2134

**60days interest accrued for 2018 on note [1Jan -1March]

**since total interest accrued on note = 4267 -2133 in 2017 = 2134

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Answer 2

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Exercise 9-4 Interest-bearing notes payable with year-end adjustments LO P

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