Question

Keesha Co, borrows $230,000 cash on November 1 of the current year by signing a 90-day, 9%, $230,000 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

1
January 30, Following year
2
	Total through maturity	Interest expense Current year	Interest expense Following year
Principal	230000	230000	230000
Rate(%)	9%	9%	9%
Time	90/360	60/360	30/360
Total interest	5175	3450	1725
3
		Debit	Credit
a	Cash	230000
	Notes payable		230000
b	Interest expense	3450
	Interest payable		3450
c	Interest expense	1725
	Interest payable	3450
	Notes payable	230000
	Cash		235175