Answer:
See explanation section.
Explanation:
Carboy records an adjusting entry at December 31, 2019. The journal entry is -
Interest Expense (Debit) 450 (Note - 1)
Interest Payable (Credit) 450
Note - 1: Borrowing - $120,000; Interest Rate = 9%; Maturity date = 45 days.
(Assuming 360 days = 1 year).
Therefore, interest expense = ($120,000*0.09)*(15/360) = $450.
Since the maturity date is 45 days, from December 16 to December 31, it should be 15 days. And the maturity date should be January 30, 2020.
The journal entry to record the interest plus principal paid -
Date Particulars Debit Credit
Jan-30, 2020 Interest Expense 900
Interest payable 450
Notes Payable 120,000
Cash 121,350
The interest expense for this month to be payable = $(120,000*0.09)/12 = $900.
Since there is an interest due of 450, interest payable becomes debit as the payment is done. The same as for notes payable.
