Answer:
<u>Cosimo Enterprises</u>
cash 260,000 debit
note payable 260,000 credit
--to record issuance of the note--
note payable 260,000 debit
interest expense 1,625 debit
cash 261,625 credit
--to record honor of the note--
<u>Dixon Industries</u>
note receivables 260,000 debit
cash 260,000 credit
--to record reception of a note--
cash 261,625 debit
note receivable 260,000 credit
interest reenue 1,625 credit
--to record honor of the note--
Explanation:
principal x rate x time = interest
where time and rate must be express in the same metric.
In this case portion of a 360 year
260,000 x 0.05 x 45/360 = 1,625
At maturity we write-off the note account and reocgnize the interest expense/revenue depending on which side we are.
if we issued the noe, we are doin an interest expense.
If we have the note we receive the cash get interest revenue.
