Question

In: Accounting

A company borrowed $75,000 by signing a 75-day, 5% note payable from its bank on Ju,y...

A company borrowed $75,000 by signing a 75-day, 5% note payable from its bank on Ju,y 15.

Required:

1. Prepare jorunal entry to record the borrowing of money Indicate maturity date. (2 points)

2. Compute interest amount. (3 points)

3. Compute the cash payment due on the note's maturity date. (2 points)

4. Prepare jorunal entry to record the payment of the note on maturity date. (3 points)

Solutions

Expert Solution

1.

Month days
July 16
August 31
September 28
Total days 75 days

Maturity date = 75 days

Journal

Date

Account Title and Explanation

Debit

Credit

July 15 Cash 75,000
Note payable 75,000

2.

Interest = Note payable x Interest rate x 75/360

= 75,000 x 5% x 75/360

= $781.25

3.

Cash payment due at the maturity = Note payable + Interest

= 75,000 + 781.25

= $75,781.25

4

Journal

Date

Account Title and Explanation

Debit

Credit

Sept 28 Note payable 75,000
Interest expense 781.25
Cash 75,781.25

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