Question

Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. For example, Mattel builds up its inventory to meet the needs of retailers selling to Christmas shoppers. A large portion of Mattel's sales are on credit. As a result, Mattel often collects cash from its sales several months after Christmas. Assume on November 1, 2018, Mattel borrowed $6 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 8.0 percent payable at maturity. The accounting period ends December 31.

Required:

1. 1, 2 & 3. Prepare the required journal entries to record the note on November 1, 2018, interest on the maturity date, April 30, 2019, assuming that interest has not been recorded since December 31, 2018. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field

   1. ​​​​​​​Record the borrowing of $6,000,000.

   2. Record the interest accrued on the note payable as of December 31, 2018.
   3. Record the repayment of the note plus interest on the maturity date.

Answer 1

Date	General Journal	Debit	Credit
Nov 01,2018	Cash	6000000
	Notes Payable(short-term)		6000000
Dec 31,2018	Interest expense	80000		=6000000*8%*2/12
	Interest payable		80000
Apr 30,2019	Interest expense	160000		=6000000*8%*4/12
	Interest payable	80000
	Notes Payable(short-term)	6000000
	Cash		6240000