Question

On April 12, Hong Company agrees to accept a 60-day, 10%, $6,100 note from Indigo Company to extend the due date on an overdue account. What is the journal entry needed to record the transaction by Indigo Company?

Answer 1

Answer:

Explanation:

Since Notes payable is $6,100

The interest would be = $6,100 × 10% × 60÷ 360

                                     = $101.67

Total of interest + notes payable = $6100 + $101.67

                                                      = $6201.67

So, the journal entry would be

Notes payable A/c Dr    $6,100

Interest Expense A/c Dr $101.67

         To Cash A/c                           $6201.67

(Being notes payable is accepted)

Since, notes is issued and interest is charged so both accounts is debit and cash is gone so it would be credited.