Question

On March 1, Young Co. borrowed $1,000 by extending their past-due account payable with a 120-day, 6% interest-bearing note. On June 29, the due date, Young pays the amount due in full. This entry would be recorded by Young with a credit to _____ in the amount of ______.

Answer 1

Answer:

This entry would be recorded by Young with a credit to cash account in the amount of $1,020.

Explanation:

The complete journal entry for June 29 should be

• Dr Notes Payable account 1000
• Dr Interest Expense account 20
• Cr Cash account 1020

The total interest due = $1,000 x 6% x 4/12 =$20

Notes payable is a liability account and it decreases, so it should be debited.

All expenses are debited.

Cash is an asset account and it decreases, so it should be credited.