Question

On September 1, 2019, Westwood Builders borrowed $200,000 from Colorado State Bank by issuing a 7-month, $200,000, 6% note. Westwood Builders recorded the December 31, 2019 year-end adjusting entry to accrue interest. What entry will Westwood Builders make to pay off the note and interest at maturity on April 1, 2020?
A.

Notes Payable 200,000

Interest Payable 7,000

Cash 207,000


B.

Notes Payable 200,000

Interest Expense 7,000

Cash 207,000


C.

Notes Payable 200,000

Interest Payable 4,000

Interest Expense 3,000

Cash 207,000


D.

Notes Payable 200,000

Cash 200,000

Answer 1

Answer:

A.

Notes Payable 200,000

Interest Payable 7,000

Cash 207,000

Explanation:

The Journal entry is shown below:-

Notes payable Dr,       $200,000  

Interest payable Dr,     $7,000  

       To Cash                        $207,000  

(Being pay off the note and interest at maturity is recorded)

Therefore for recording the pay off the note and interest at maturity we simply debited the notes payable and interest payable as it decreases the liability and we credited the cash as it also decreasing the assets.