Question

Principles of Accsu On May 15, wid Quest Clothiers bernowed sone money on a &month note to provide cash during the slow season of the year. The ntorest e was 8s. At the teme the note was due, the amount of interest owed was $420 Determine the amount borrowed by Wid Quest.(Round cakculation to 6 decimal pleces, n.g. 1.251241 and fina answer to 0 decimal places eg 125) mount borrowed by Wld Quest as the interest rate e f the amount of interest owed was $549(Round intermediate celuatien decimal decimaf places eg. 1.251241 and 6 Interest Rate Prepare the erntery for the inial bonowing and the repayment for the facts in part ca) (Credit accent tles ave autematically lindleed when bo not inde Segt. 15

Answer 1

(i)

Interest on note payable = $420

Time duration = 4 months

Interest rate = 8%

Interest on note payable = Note payable x 8/100 x 4/12

420 = Note payable x 8/100 x 4/12

Note payable = 420 x 100/8 x 12/4

= $15,750

Hence, amount borrowed by Wild Quest = $15,750

(ii)

Amount borrowed = $18,300

Interest payable on borrowings = $549

Time duration = 4 months

Interest rate = ?

Interest on note payable = Note payable x Interest rate/100 x 4/12

549 = 18,300 x Interest rate/100 x 4/12

Interest rate = 549 x 100 x 12/4 x 1/18,300

= 9

Hence, interest rate on borrowings = 9%

(iii)

Journal

Date	Account title	Debit	Credit
May 15	Cash	15,750
	Note payable		15,750
Sep. 15	Note payable	15,750
	Interest expense	420
	Cash		16,170

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