Question

# Organic Farmers Co-Op borrows \$336,000 cash on October 1, 2018, by signing a 180-day, 15% note...

Organic Farmers Co-Op borrows \$336,000 cash on October 1, 2018, by signing a 180-day, 15% note with a face value of \$336,000.

Required:

1. How much interest expense results from this note in 2018?

2. How much interest expense results from this note in 2019?

3. Prepare journal entries to record (a) issuance of the note, (b) accrual of interest at the end of 2018, and (c) payment of the note at maturity. (Assume no reversing entries are made.)

1) Interest expense in 2018 = 336000*15%*90/360 = \$12600

2) Interest expense in 2019 = 336000*15%*90/360 = \$12600

3) Journal entries :

 No account and explanation debit credit a Cash 336000 Notes payable 336000 (To record issue note) b Interest expense 12600 Interest payable 12600 (To record accured interest) c Notes payable 336000 Interest payable 12600 Interest expense 12600 Cash 361200 (To record payment of note)

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