Question

Your company borrows $80,000 cash on December 1, by signing a 120 day, 8% note, with a face value of $80,000. Answer the following questions and record the transactions noted. Record the issuance of the note on December 1.

Calculate and record the journal entry for interest required on December 31st.

Record the payment of interest and principal at maturity.

Answer 1

Date	General journal	Debit	Credit
December 1	Cash	$80,000
	Note payable		$80,000
	( To record issuance of note)
December 31	Interest expense	$533
	Interest payable		$533
	( To record interest expense)
March 31	Note payable	$80,000
	Interest expense	$1,600
	Interest payable	$533
	Cash		$82,133
	( To record payment of interest and principal at maturity)

Interest payable on December 31 = Note payable x interest rate x 30/360

= 80,000 x 8% x 30/360

= $533

Month	Days
December	30
January	31
February	28
March	31
Total	120 days

Interest expense on March 31 = Note payable x interest rate x 90/360

= 80,000 x 8% x 90/360

= $1,600

Kindly comment if you need further assistance.

Thanks‼!