Answer:
Explanation:
The journal entries are shown below:
a. Cash A/c Dr $45,000
To Notes payable A/c $45,000
(Being note is issued for cash)
b. Interest expense A/c Dr $333
To Interest payable A/c $333
(Being accrued interest adjusted)
The computation is shown below:
= Principal × rate of interest × number of days ÷ (total number of days in a year)
= $45,000 × 9% × (30 days ÷ 365 days)
= $333
The 30 days is calculated from December 1 to December 31
(C) Interest expense A/c Dr $665.75
Interest payable A/c Dr $333
Notes payable A/c Dr $45,000
To Cash A/c $45,998.75
(Being cash is paid on maturity)
The computation is shown below:
= Principal × rate of interest × number of days ÷ (total number of days in a year)
= $45,000× 9% × (60 days ÷ 365 days)
= $665.75
From January 1 to March 1 it would be 60 days
We assume 365 days a year.
