Answer:
The Journal entry is:
Debit notes payable = $8,100
Debit Interest Expense = $108
Credit cash= $8,208
Explanation:
In this question, we are asked to calculate the Journal entry that would be made by Indigo company when it records payment of the note on the maturity date.
This can be calculated as follows:
Firstly, we calculate the interest on notes expenses:
It should be noted that we use 360 days in a year.
Interest on notes expenses = 8/100 * 8,100 * 60/360 = $108
The liability repaid has a value of $8,100
Now we calculate the value of the total cash outflow = The liability repaid + interest on notes expenses = $108 + $8,100 = $8,208.
The Journal entry is thus recorded as the following:
Debit notes payable = $8,100
Debit Interest Expense = $108
Credit cash= $8,208
