Answer:
Ivanhoe Company on January 1 would record the proceeds and issuance of the note as follows:
Debit Cash $365,000
Credit Notes payable $365,000
<em>(To recognize notes payable to Moss County Bank)</em>
Explanation:
Note payable is a promissory note with a written promise made by the borrower to the lender (payee) to pay a certain, definite sum at a specified date.
Interest expense on the notes is calculated as: Principal x Interest Rate x Time
In this case, the total interest expense to Ivanhoe Company is $365,000 x 6%/12 x 9 months = $16,425.
Monthly interest expense to the Company over the 9-month period is therefore $16,425 / 9 months = $1,825.
