Question

On September 1, 2016 Green Industry borrowed $24,000,000 cash at 9%. The term of the note is one year (matures on September 1, 2017) and all interest is payable at maturity. Green Industry's fiscal period is the calendar year.

Required:

A. Prepare the journal entry for the issuance of the note.

B. Prepare the appropriate adjusting entry for the note on December 31, 2016.

C. Prepare the journal entry for the payment of the note at maturity.

Answer 1

Date	Accounts and Explanation	Debit	Credit
Sep. 1, 2016	Cash	24000000
	Notes payable		24000000
	(To record the issuance of the note)
Dec. 31, 2016	Interest expense (9% x $24000000 x 4/12)	720000
	Interest payable		720000
	(To record interest accrued on note payable)
Sep. 1, 2017	Interest payable	720000
	Interest expense (9% x $24000000 x 8/12)	1440000
	Notes payable	24000000
	Cash		26160000
	(To record payment of note at maturity)