Answer:
Explanation:
The journal entries are shown below:
(A) Cash A/c Dr $37,200
To Notes payable A/c $37,200
(Being note is issued for cash)
(B) Interest expense A/c Dr $558
To Interest payable A/c $558
(Being accrued interest adjusted)
The interest expense would be
= Principal × rate of interest × number of months ÷ (total number of months in a year)
= $37,200 × 9% × (2 months÷ 12 months)
= $558
The two months is calculated from November 1 to December 31
(C) Interest expense A/c Dr $279
Interest payable A/c Dr $558
Notes payable A/c Dr $37,200
To Cash A/c $38,037
(Being cash is paid on maturity)
The computation is shown below
= Principal × rate of interest × number of months ÷ (total number of months in a year)
= $37,200 × 9% × (1 months÷ 12 months)
= $279
The two months is calculated from the December 31 to February 1
