Question

On November 7, 2017, Mura Company borrows $280,000 cash by signing a 90-day, 10% note payable with a face value of $280,000. (Use 360 days a year. Do not round your intermediate calculations.)

1. Compute the accrued interest payable on December 31, 2017.

2. & 3. Prepare the journal entry to record the accrued interest expense at December 31, 2017 and payment of the note at maturity.

Answer 1

• [1]
  Accrual Interest payable will be for 54 days (23 days of November and 31 Days of December)
  = $ 280000 x 10% x 54/360
  = $ 4200
• [2] and [3]

Date	Accounts title	Debit	Credit
31-Dec	Interest Expense	$4,200
	Interest Payable		$4,200
	(to record accrual)
5 Feb Maturity	Notes Payable	$280,000
	Interest Expense	$2,800
	Interest Payable	$4,200
	Cash ($280000 + 280000 x 10% x 90/360)		$287,000
	(to record payment)