Question

1. Wolf Company borrowed $5,000 on an 8% note payable on March 1, 2010. The maturity date of the

note (and payment of all interest) is September 1, 2011. The accounting period ends December 31.

Assuming no adjusting entries are made during the year, prepare the journal entry for each of the

following dates:

A. March 1, 2010.

B. December 31, 2010.

C. September 1, 2011

Answer 1

Date	Accounts and Explanation	Debit	Credit
Mar 1, 2010	Cash	$5,000
	Note Payable		$5,000
	(To record borrowed against note payable)
Dec 31, 2010	Interest Expenses	$333
	Interest Payable		$333
	(To record accrued interest) ($5,000 x 8% x 10/12)
Sep 1, 2011	Interest Expenses	$67		($5,000 x 8% x 2/12)
	Interest Payable	$333
	Notes Payable	$5,000
	Cash		$5,400
	(To record payment of note payable)