Question

A business issued a 30-day, 7% note for $58,800 to a creditor on account. The company uses a 360-day year for interest calculations. Required: Journalize the entries to record (a) the issuance of the note on April 30 and (b) the payment of the note at maturity, including interest. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Answer: Please refer to Explanation

Step-by-step explanation:

April 30

DR Accounts Payable $58,800

CR Notes Payable $58,800

(To record the issuance of Note for Payable)

May 30

DR Notes Payable $58,800

DR Interest Expense $343

CR Cash $59,143

(To record Payment of Note)

Calculations.

Interest Expense

=(Note Amount * Interest / 360) * duration of Note

=( 58,800 * 7% / 360) * 30

= $343