Solution:
Journal Entry
Date |
General Journal |
Debit |
Credit |
April.30, 2016 |
Notes Payable |
$7,200,000 |
|
Interest Payable (7,200,000*9.5%*2/12) |
$114,000 |
||
Interest Expense (7,200,000*9.5%*4/12) |
$228,000 |
||
Cash |
$7,542,000 |
Note: Company will record 2 months interest expense on Dec 31, 2015. So on Dec 31, 2015 the following entry would be passed:
Debit --- Interest Expense $114,000
Credit --- Interest Payable $114,000
So on maturity company will pay 4 months interest as well as the interest payable for 2 months.
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