Question

Uniform Supply accepted a $12,000, 90-day, 7% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on January 15 of the next year when the note is paid? (Assume reversing entries are not made.).

Answer 1

Answer:

- Credit (decrease) cash account (112): $12,207

- Debit (decrease) loan account (341): $12,000

- Debit (increase) interest expenses (635): $207

Explanation:

The interest occurred = $12000*7%/365*90=$207

The note to be paid = $12,000

Total paid out: $12,207

If Uniform Supply use cash to pay off the note then the entries include:

- Credit (decrease) cash (112): $12,207

- Debit (decrease) loan account (341): $12,000

- Debit (increase) interest expenses (635): $207