Question

Exercise 9-4 Interest-bearing notes payable with year-end adjustments LO P1 Keesha Co. borrows $250,000 cash on November 1 of the current year by signing a 120-day, 11%, $250,000 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. Complete this question by entering your answers in the tabs below. Req 1 Req 2 and 3 Req 4 On what date does this note mature? (Assume that February has 28 days) On what date does this note mature? < Req1 Req 2 and 3 >

Answer 1

	ANSWER = 1)
		Answer = Note Mature as on 1st of March
	ANSWER = 2 & 3)
				Nov, 01 to Dec 31	Jan, 01 to 1st of March
			Total Through Maturity	Interest Expenses current year	Interest expenses following year
		Principal	$                 2,50,000	$                      2,50,000	$                        2,50,000
		Rate	11%	11%	11%
		Time	180 Days	180 Days	180 Days
		Total interest	$                       9,167	$                            4,583	$                              4,583
			($ 250,000 X 11% X 120/360)	($ 250,000 X 11% X 60/360)	($ 250,000 X 11% X 60/360)
	ANSWER = 4)
Journal Entries
Sr. No.	Transaction	Account Title and explanation	Debit	Credit
1	(A)	Record the issuance of Note on November 1
		Cash	$                 2,50,000
		Note Payable		$                      2,50,000
2	(B)	Record the interest accrued on the notes as of december 31 , current year
		Interest Expenses	$                       4,583
		Interest Payable		$                            4,583
3	(C)	Record the payment of the note at maturity
		Note Payable	$                 2,50,000
		Interest Payable	$                       4,583
		Interest Expenses	$                       4,584
		Cash		$                      2,59,167