Question

M Co. paid A Co. for merchandise with a $2,000, 90-day, 8% note dated April 1. If M pays off the note at maturity, what entry should A make on its books at that time?

Answer 1

Maturity date
April 2 to April 30	29	days
May 1 to May 31	31	days
June 1 to June 30	30	days
Total days	90
Maturity date = June 30

Date	Account Name and Explanation	Debit	Credit
June 30	Notes Payable	$2,000
	Interest expenses   [$2,000 x 8% x (90 days / 360 days)]	$40
	Cash                   [$2,000 + $40]		$2,040
	(To record payment of notes payable along with interest)