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Sladkaya [172]
3 years ago
9

Sheffield borrowed $701000 on October 1, 2017 and is required to pay $721000 on March 1, 2018. What amount is the note payable r

ecorded at on October 1, 2017 and how much interest is recognized from October 1 to December 31, 2017?
Business
1 answer:
Georgia [21]3 years ago
5 0

Answer:

On October 01, 2017

The amount actually borrowed that is $ 701,000 will be recorded as liability/note payable on october 01, 2017. The following accounting entry will be passed

Debit Cash Asset           $ 701,000

Credit Note payable       $ 701,000

Interest recognized from October 1 to December 31, 2017

The premium amount paid on redemption will be recorded as interest over the period of time. The interest amount is

Interest = 721,000 -701,000 = $ 20,000

So this above calculated expense will be recognized as an expense over loan period.

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