Answer:
See explanation section
Explanation:
Requirement 1
April 30 is the maturity date of the note.
December 31 + January 31 + February 28 + March 31 + April 30 = 150 days.
Therefore, the note will be matured in the April 30, next year.
Requirement 2 & 3
Current year Interest: December 1 - December 31 = 30 days interest = $230,000 × 12% × (30 ÷ 360) = $2,300.
Following year Interest: January 1 - April 30 = 120 days interest = $230,000 × 12% × (120 ÷ 360) = $9,200.
Total Interest = $11,500
Requirement 4
Journal Entries
(a) Dec. 1 Cash Debit $230,000
Notes payable Credit $230,000
To record the borrow a loan by issuing a 150-day, 12% note.
(b) Dec. 31 Interest Expense Debit $2,300
Interest payable Credit $2,300
To record the accrued interest expense on December 31 (Current year).
(c) April 30 Notes payable Debit $230,000
Interest payable Debit $2,300
Interest Expense Debit $9,200
Cash Credit $241,500
To record the payment of the note at maturity.
