Answer:
(1) $1,920
Explanation:
(1) Accrued interest payable on December 31, 2017:
= Principle × Rate × Time period
= $160,000 × 8% × (54 ÷ 360)
= $1,920
The Journal entries are as follows:
(2) On December 31, 2017
Interest Expense A/c Dr. $1,920
To interest payable $1,920
(To record the accrued interest expense)
(3) On February 05, 2018
Notes payable A/c Dr. $160,000
Interest Expense A/c Dr. $1,920
Interest payable A/c Dr. $1,280
To cash A/c $163,200
(To record the payment of notes and interest)
Working notes:
cash:
= $160,000 + [$160,000 × 8% × (90 ÷ 360)]
= $1,280
