Question

The Yankel Corporation’s controller prepares adjusting entries only at the end of the fiscal year. The following adjusting entries were prepared on December 31, 2018:

	Debit	Credit
Interest expense	2,760
Interest payable		2,760
Insurance expense	92,000
Prepaid insurance		92,000
Interest receivable	5,520
Interest revenue		5,520

Additional information:

The company borrowed $46,000 on June 30, 2018. Principal and interest are due on June 30, 2019. This note is the company’s only interest-bearing debt.

Insurance for the year on the company’s office buildings is $138,000. The insurance is paid in advance.

On August 31, 2018, Yankel lent money to a customer. The customer signed a note with principal and interest at 9% due in one year.

Required:
1. What is the interest rate on the company’s note payable?
2. The 2018 insurance payment was made at the beginning of which month?
3. How much did Yankel lend its customer on August 31?
  

Answer 1