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On November 16, 2020, Source for Sports gave Kinsmen Sports a 90-day, 12%, $120,000 note payable...

On November 16, 2020, Source for Sports gave Kinsmen Sports a 90-day, 12%, $120,000 note payable to extend a past due account payable. Prepare the journal entry for Source for Sports to record the note and the extension of the past due account.                                 

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Answer #1

Working Note:

1. Calculation of Interest on Note Payable

= $120,000 X 12% X 90/360

= $3,600

Note: 360 Days is taken for the calculation of Interest expense on Note Payable however you can also take 365 Days.

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