On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of...

On December 1, Victoria Company signed a 90-day, 6% note payable, with a face value of $15,000. Assuming the company does not prepare reversing entries, what is the journal entry to record the repayment of the note on March 1?

Multiple Choice

Debit Notes Payable, $15,000; Debit Interest Expense, $150; Debit Interest Payable, $75; Credit Cash, $15,225.

Debit Notes Payable, $15,000; Credit Cash, $15,000.

Debit Notes Payable, $15,225; Credit Cash, $15,225.

Debit Notes Payable, $15,000; Debit Interest Expense, $225; Credit Cash, $15,225.

Debit Notes Payable, $15,075; Debit Interest Expense, $150; Credit Cash, $15,225.

Solutions

Expert Solution

On march 1, date of repayment:
[Debit] Note Payable by $ 15000 face value,
[Debit] Interest Payable by $ 75 [Interest from 1 Dec to 31 Dec = 30 days interest = 15000 x 6% x 30/360]
[Debit] Interest Expense by $ 150 [Remaining interest for 60 days = 15000 x 6% x 60/360]
[Credit] Cash by $ 15,225 (Cash paid)
Correct Answer = Option #1:
Debit Notes Payable, $15,000; Debit Interest Expense, $150; Debit Interest Payable, $75; Credit Cash, $15,225.

ekkarill92 answered 1 year ago

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