Question

On June 1, Jasper Company signed a $25,000, 120-day, 6 % note payable to cover a past due account payable. a. What is the total amount of interest to be paid on this note? b. Prepare Jasper Company's general journal entry or t-accounts to record the issuance of the note payable. c. Prepare Jasper Company's general journal entry or t-accounts to record the payment of the note on September 29

Answer 1

Note Payable = $25,000

6% note payable

Period = 120 days

If it is assumed that 365 days in a year

a) The total amount of interest paid = $25,000 * 6% * 120 days / 365 days

The total amount of interest paid = $493.15

b) June 1

Cash account....................Debit $25,000

To Notes Payable account....Credit Notes Payable

c) September 29,

Notes payable account .....................Debit $25,000

Interest Expense account..................Debit $493.15

To Cash account..............................Credit $25,493.15

Alternative

If it is assumed that 360 days in a year

The total amount of interest paid = $25,000 * 6% * 120 days / 360 days

The total amount of interest paid = $500

b) June 1

Cash account....................Debit $25,000

To Notes Payable account....Credit Notes Payable

c) September 29,

Notes payable account .....................Debit $25,000

Interest Expense account..................Debit $500

To Cash account..............................Credit $25,500