Question

PLEASE CHARTS I PROVIDED

A business issued a 120-day, 6% note for $235,000 to a creditor on account.

a. Journalize the entry to record the issuance of the note on January 1. Refer to the Chart of Accounts for exact wording of account titles. Round amounts to the nearest whole dollar.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

b. Journalize the entry to record the payment of the note at maturity, including interest on May 1. Assume a 360-day year and round amounts to the nearest whole dollar. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 2

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3

Answer 1

A. Journal entry.

Date	Account	Debit	Credit
Jan 1	Cash	$ 235,000
	To Note payable		$ 235,000
	(issuing note)

B. From January 1 to May 1, there are 4 months interest to be paid.

Interest for 4 month = [(235,000 x 6%)/360]x120 days.

Interest for 4 month = $ 4,700.

The entry will be,

Date	Account	Debit	Credit
May 1	Note payable	$ 235,000
	Interest Expense	$ 4,700
	To Cash		$ 239,700

SUMMARY:

A. Note payable is a liability and is credited.

B. When paying cash, note payable liability decreases and hence it is debited. Also four months interest amount too paid.