Answer:
a. Journal Entry on September 1st, 2019:
Dr: Cash/ Bank $50,000
Cr: Short Term Loan $50,000
b. Journal Entry to accrue interest on December 31st, 2019 is:
Dr: Interest Expense $1,333.33
Cr: Accrues Interest Expense $1,333.33
c. Interest Expense on March 31st, 2020 is :
$1,000
d. The Total cash company will pay back on March 31st 2020:
52,333.33 (50,000 principal + 2,333.33 interest)
Explanation:
b. Annual Interest is $50,000×8% = $4,000 per annum.
The annual interest rate is prorated for 4 months (Sept 2019 -Dec 2019)
$4,000 *4/12 = $1,333.33
c. Interest expense for next fiscal year up till March 2020 is calculated by prorating annual interest expense for 3 months (Jan 2020- Mar 2020)
$4,000×3/12 = $1,000
