Question

Chapter 9 Exercises Saved Keesha Co. borrows $160,000 cash on November 1 of the current year by signing a 180-day, 11%, $160,000 note. 1.33 points 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. Complete this question by entering your answers in the tabs below. eBook Reg 1 Reg 2 and 3 Reg 4 Hint On what date does this note mature? (Assume that February has 28 days) Print On what date does this note mature? < Req1 Req 2 and 3 >

Answer 1

Answer of Part 1:

Maturity Date = 29 days (November) + 31 days (December) + 31 Days (January) + 28 days (February) + 31 Days (March) + 30 Days (April)
Maturity Date = 30 April following year

Answer of Part 2 & 3:

Current Year:

Period = 29 days (November) + 31 days (December)
Period = 60 days

Interest Expense = $160,000 * 11% * 60/365
Interest Expense = $2,893

Following Year:

Period = 31 Days (January) + 28 days (February) + 31 Days (March) + 30 Days (April)
Period = 120 days

Interest Expense = $160,000 * 11% * 120/365
Interest Expense = $5,786

Answer of Part 4: Transaction Credit Debit 160,000 160,000 2,893 General Journal Cash Notes Payable Interest Expense Interest Payable Interest Expense Interest Payable Notes Payable Cash 2,893 5,786 2,893 160,000 168,679