Question

E10-2 Recording a Note Payable through Its Time to Maturity (LO 10-2) Many businesses borrow money during periods of increased business activity to finance Inventory and accounts receivable. For example, Mitt builds up its inventory to meet the needs of retailers selling to Christmas shoppers. A large portion of Mitt's sales are on credit. As a result, Mitt often collects cash from its sales several months after Christmas. Assume on November 1, 2018, Mitt borrowed $75 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 6.50 percent payable at maturity. The accounting period ends December 31 Required: 1, 2 & 3. Prepare the required journal entries to record the note on November 1, 2018, the adjusting entry necessary on December 21. 2018, and the payment of interest and principal on the maturity date, April 30, 2019, assuming that interest has not been recorded since December 31, 2018. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No Journal Entry Required in the first account field.) View transaction list Journal entry worksheet Record the borrowing of $7.500,000.

Answer 1

Journal entry

Date	account and explanation	debit	Credit
Nov 1	Cash	7500000
	Notes payable		7500000
Dec 31	Interest expense (7500000*6.5%*2/12)	81250
	Interest payable		81250
Apr 30	Notes payable	7500000
	Interest payable	81250
	Interest expense	162500
	cash		7743750