Answer:
Explanation:
1. The maturing date of note will be 30 January 2016
( 29 days in November + 31 Days in December and 30 Days in January)
2. The interest expense would be
On 2015:
= Principal × rate of interest × number of days ÷ (total number of days in a year)
= $200,000 × 9% × (60 days ÷ 360 days)
= $3,000
( 29 days in November + 31 Days in December)
3. On 2016:
= Principal × rate of interest × number of days ÷ (total number of days in a year)
= $200,000 × 9% × (30 days ÷ 360 days)
= $1,500
(30 Days in January)
We assume 360 days in a year.
4. (A) Cash A/c Dr $200,000
To Notes payable A/c $200,000
(Being note is issued for cash)
(B) Interest expense A/c Dr $3,000
To Interest payable A/c $3,000
(Being accrued interest adjusted)
(C) Interest expense A/c Dr $1,500
Interest payable A/c Dr $3,000
Notes payable A/c Dr $200,000
To Cash A/c $204,500
(Being cash is paid on maturity)
