Question

On May 15, Metlock Clothiers borrowed some money on a 4-month note to provide cash during the slow season of the year. The interest rate on the note was 8%. At the time the note was due, the amount of interest owed was $550. Determine the amount borrowed by Metlock. (Round Intermediate calculations to 6 decimal places, e.g. 1.251241 and final answer to o decimal places, e.g. 125.) Amount borrowed by Metlock Assume the amount borrowed was $14,400. What was the interest rate if the amount of interest owed was $5287 (Round intermediate calculations to 6 decimal places, e.g. 1.251241 and final answer to decimal places, e.g. 152.) Interest Rate Prepare the entry for the initial borrowing and the repayment for the facts in part (a). (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation Initial Borrowing: May 15 Repayment: Sept. 15

Answer 1

$ Interest on Maturity Time of Note Rate of interest Rate of interest (4 months) 550.00 4 months 8.00% per annum 2.67% Amount borrowed by metlock Interest on Maturity Rate of Interest $ 550.00 2.67% $ 20,625.00 b) Assume Interest amount = Amount borrowed $ 528.00 $14,400.00 = Interest Rate ( 4 months) = x100 Interest Amount Borrowed $528/ $14400 x 100 3.67% Annualised Int rate 3.67 % x 12/4 11.00% Date May 15 Journal Entries in the Book of Metlock Clothiers Description Debit Credit Bank $ 20,625.00 Note Payable $ 20,625.00 (To record the receipt of Note payable-Initial Borrowings) Note Payable $ 20,625.00 Interest on Note $ 550.00 Bank $ 21,175.00 (To record the payment of Note payable & Interest) Sep 15

In case of any doubts, please comment