Question

On November 7, 2017, Mura Company borrows $330,000 cash by signing a 90-day, 5% note payable with a face value of $330,000. (Use 360 days a year. Do not round your intermediate calculations.) 1. Compute the accrued interest payable on December 31, 2017. 2. & 3. Prepare the journal entry to record the accrued interest expense at December 31, 2017 and payment of the note at maturity.

Answer 1

On November 7, 2017, Mura Company borrows $330,000 cash by signing a 90-day, 5% note payable with a face value of $330,000. (Use 360 days a year.

1.

Accrued interest payable on December 31, 2017 = 330,000 x 5% x 54/360

= $2,475

2.

Interest expense from January 1, 2018 to February 5, 2018 = 330,000 x 5% x 36/360

= $1,650

Journal

Dec. 31, 2017	Interest expense	2,475
	Interest payable		2,475
February 5, 2018	Note payable	330,000
	Interest expense	1,650
	Interest payable	2,475
	Cash		334,125