Question

1. Tara’s Treasures borrows $75,000 for 9 months at 8.5% interest on Jul 1, 2016 from the Bank of America.

Required:

1. Record the entry on July 1, 2016 for the borrowing of the funds

7/1/16                                                        Dr.                               Cr.

Cash                                                    $75,000

Short-Term Notes Payable                                         $75,000

2. Accrue the interest payable on Dec 31, 2016

75,000 x 0.085 x 6/12 = 3,187.5

12/31/16                                                                      Dr.                   Cr.

Interest Expense                                             $3,187.50

Interest Payable                                              $3,187.50

3. Record the repayment of the Note Payable on March 1, 2017.

75,000 x 0.085 x 2/12 = $1,062.50

3/1/17                                                  Dr.                   Cr.

            Interest Expense                     $1,062.50

            Interest Payable                      $3,187.50

            Short-Term Notes Payable     $75,000

                                    Cash                                        $79,250

Answer 1

9 month note will repaid on 01 April 2017. so entries will be

Date	Account title	Debit	Credit
07/01/2016	Cash	$ 75,000.00
	Short term Note payable		$ 75,000.00
12/31/2016	Interest expenses ($75,000*8.5%*6/12)	$    3,187.50
	Interest payable		$    3,187.50
04/01/2017	Interest expenses ($75,000*8.5%*3/12)	$    1,593.75
	Interest payable	$    3,187.50
	Short term Note payable	$ 75,000.00
	Cash		$ 79,781.25

if repayment date is mentioned in question, then your entries are correct