Question

On November 1, Alan Company signed a 120-day, 10% note payable, with a face value of $45,000. Alan made the appropriate year-end accrual. What is the journal entry as of March 1 to record the payment of the note assuming no reversing entry was made

Answer 1

Answer:

Debit Notes Payable $45,000; debit Interest Payable $750; debit Interest Expense $750; credit Cash $46,500

Explanation:

The journal entry is given below:

Notes payable $45,000  

Interest payable ($45,000 × 10% × 60 ÷ 360) $750  

Interest expense ($45,000 × 10% × 60 ÷ 360) $750  

            To Cash $46,500

(Being payment of notes payable is recorded)

here note payable, interest payable, interest expense is debited as it increased the expenses and decreased the liabilities while on the other hand the cash is credited as it decreased the assets