Question

On November 1, 2021, Dual Systems borrows $170,000 to expand operations. Dual Systems signs a six-month, 9% promissory note. Interest is payable at maturity. Dual System's year-end is December 31. 1., 2. & 3. Record the following transactions for the note payable by Dual Systems. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Answer 1

Following are the journal entries required by Dual Systems:

On November 1, 2021
Cash..................... Dr. $170,000
To Notes Payable............... $170,000
(Issuance of Notes Payable)

On December 31, 2021
Interest Expense (P&L)............... Dr. $2,550 [($170,000 x 9%) x 2/12]
To Interest Payable................................. $2,550
(Interest expense incurred, but not paid for 2 months)

On April 31, 2021
Notes Payable........................ Dr. $170,000
Interest Payable...................... Dr. $2,550
Interest Expense..................... Dr. $5,100 [($170,000 x 9%) x 4/12]
To Cash................................................... $177,650
(Payment made for notes payable including interest)