Answer:
cash 40,000 debit
note payable 40,000 credit
--to record signing of note----
interest expense 300 debit
interest payable 300 credit
--to record accrued interest----
note payable 40,000 debit
interest payable 300 debit
interest expense 600 debit
cash 40,900 credit
--to record honor of the note---
Explanation:
when signing the note we receive the cash and delcare the liability
at December 31th
we recognzie the accrued interest: for the month
we need to convert the annual rate to monthly: 0.09/12 = 0.0075
40,000 x 0.0075 = 300
at payment of the note, we write-off the note
we pay the full interest:
300 per month x 3 month = 900
we already accrued one so the expense will be for 600
