Question

E9-8 LO9-3 Reporting Notes Payable and Calculating Interest Expense North Face is one of the world's most popular outdoor apparel companies. Assume that North Face bor rows $2 million from U.S. Bank and signs a note promising to pay back the $2 million in nine months, at which time North Face also will pay any accrued interest. The interest rate on the note is 8%. Required: 1. Prepare the journal entry North Face will record when it signs the note and receives the cash. enare the journal entry that North Face will record when it pays of the note and any accrued inter est after nine months.

Answer 1

Date	Accounts Titles and Explanation	Debit	Credit
1	Cash	$2,000,000
	Notes Payable		$2,000,000
	(To record borrows cash by signs a note)
2	Notes Payable	$2,000,000
	Interest Expenses	$120,000
	Cash		$2,120,000
	(To record pays off the note and accrued interest)