Question

Keesha Co. borrows $150,000 cash on December 1 of the current year by signing a 90 day, 9%, $150,000 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 Reg 4 On what date does this note mature? (Assume that February has 28 days) On what date does this note mature? Req 2 and 3 >

Answer 1

Ans 1 $1,50,000 9% Note Payable rate date of borrowing Dec 1 days Maturity date Feb 28 90 Ans 2 and Total Through Maturity Interest Expense Interest Expense Current Year Following Year $1,50,000 $1,50,000 9% 9% Principal Rate (%) Time Total Interest $1,50,000 9% 90 $3,375 31 59 $1,163 [($150000 x 9%)/360 x 31] $2,213 [($150000 x 9%)/360 x 59] [($150000 x 9%)/360 x 90] Ans 4 Journal Entry Tansaction Credit (a) $1,50,000 (b) Account Title Debit Cash $1,50,000 Notes Payable (To record notes payable) Interest Expense $1,163 Interest Payable (To record accrual of interest expense) Notes Payable $1,50,000 Interest Expense $3,375 Cash (To record payment of interest and notes payable) $1,163 $1,53,375