Question

Q 10.25: Admire County Bank agrees to lend Givens Brick Company $600,000 on January 1st. Givens Brick Company signs a $600,000, 8%, 9-month note. Assuming that interest has already been accrued to September 30th, what entry will Givens Brick Company make to pay off the note and interest at maturity

Answer 1

Entry is given below

Explanation:

As Givens brick company is paying off the liability of note payable and the interest amount therefore, it will be debited as it is a decrease in liability. Cash will be credited as it is our asset and its decreasing.

Entry DEBIT CREDIT

Notes payable $600,000

Interest $36,000(w)

Cash $636,000

Working

Interest = $600,000 x 8% x9/12

Interest = $36,000