Explanation:
The journal entries are as follows:
On November 1, 2020
Cash A/c Dr $49,200
To Notes payable A/c $49,200
(Being the amount is borrowed)
On December 31, 2020
Interest expense A/c Dr $820
To Interest payable A/c $820
(Being the interest expense is recorded)
The computation is shown below:
= $49,200 × 10% × 2 months ÷ 12 months
= $820
On February 1, 2021
Interest expense A/c Dr $410
Interest payable A/c Dr $820
Notes payable A/c Dr $49,200
To Cash A/c $50,430
(Being cash is paid on maturity)
The computation is shown below:
= $49,200 × 10% × 1 months ÷ 12 months
= $410
