Question

Notes Payable 1. On May 5, a company borrowed $60,000 from its bank by signing a 90-day, 9% note payable. 2. On September 15, a company borrowed $75,000 from its bank by signing a 60-day, 6% note payable. Determine the maturity date for each note. 1. Prepare journal entries to record the issuance of the notes payable. 2. Prepare journal entries to record the payment of the notes at maturity. Show your work. 1. Issuance Date Account Debit Credit 2. Maturity Date Account Debit Credit

Answer 1

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Naming convention is not available, can be slightly different: Solution: 1) Credit Date May.05 Debit $ 60,000 $ 60,000 1. Issuance: Account title and explaination Cash Note payable (9%) (To record the issuance of note payable) Cash Note payable (6%) (To record the issuance of note payable) Sep.15 $ 75,000 $ 75,000 Assumption of days in a year can be 360 days or 365 days in order to calculate the interest expense: 2) Credit OR: Debit $ 60,000 $ 1,350 $ 60,000 1332 (60000*9%)/365*90 $ 61,350 $ 61,332 2. Maturity: Date Account title and explaination Aug.03 Note payable (9%) or Aug.05 Interest Expense (60000*9%)/360*90 Cash (To record the payment of note maturity) Nov.14 Note payable (6%) or Nov.15 Interest Expense (75000*6%)/360*60 Cash (To record the payment of note maturity) $ 75,000 $ 750 $ 75,000 740 (75000*6%)/365*60 75740 $ 75,750