Question

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 $8.1 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 9.50 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, interest 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.) X Answer is not complete. No Debit Credit Date Nov 01, 2018 General Journal Cash Notes Payable (short-term) 8,100,000 8,100,000 Dec 31, 2018 128,250 Interest Expense Interest Payable 128,250 Apr 30, 2019 8,100,000 256,500 Notes Payable (short-term) Interest Expense Interest Payable Cash 128,250 X 8,484,750

Answer 1

Journal entry

No	Date	General journal	Debit	Credit
1	Nov 01,2018	Cash	8100000
		Notes payable (short term)		8100000
2	Dec 31,2018	Interest expense	128250
		Interest payable		128250
3	Apr 30,2019	Notes payable(short term)	8100000
		Interest expense	256500
		Interest payable	128250
		Csh		8484750