Baylee Company issued a note to a customer for merchandise purchased. It was a 45 day,...
Baylee Company issued a note to a customer for merchandise purchased. It was a 45 day, $5000 note @ 10%. On day, 30 financial statements were prepared. Record the following entries: a. The issuing of the note b. The accrual of interest before financial statement preparation c. The retirement of the note.
Homework Answers
|
Account |
Debit | Credit |
|---|---|---|
| Purchase | 5000 | |
| Customer | 5000 | |
| Customer | 5000 | |
| Notes payable | 5000 |
| Interest expense | 62.5 | |
| Interest payable | 62.5 |
| Notes payable | 5000 | |
| Interest payable | 62.5 | |
| Cash | 5062.5 |
The above table shows the journal entries.
The total interest due at the end of the 1.5 months(45 days) is 5,000 x 10% x 1.5 / 12 = 62.5.
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