Question

During the fiscal year 2019, Alpha Corporation carried out the following transactions involving notes payable: Feb. 1: Borrowed $550,000 from Sun National Bank at an interest rate of 15% per annum, signed a six month note payable. July 31: Paid Sun National Bank note plus accrued interest.

Instruction: Prepare journal entries to record above transactions.

Answer 1

Solution:

Alpha Corporation
Journal Entries
Date	Particulars	Debit	Credit
1-Feb	Cash Dr	$550,000.00
	To Notes payable		$550,000.00
	(To record issue of note for amount borrowed)
31-Jul	Interest expense Dr ($550,000*15%*6/12)	$41,250.00
	Notes payable Dr	$550,000.00
	To Cash		$591,250.00
	(To record repayment of note at maturity)