Question

Sylvestor Systems borrows $110,000 cash on May 15, 2017, by signing a 60-day, 12% note.

1. On what date does this note mature?

2. Suppose the face value of the note equals $110,000, the principal of the loan. Prepare the journal entries to record (a) issuance of the note and (b) payment of the note at maturity

Answer 1

Step 1: Definition of bonds

Bonds are a type of debt that a company issues to complete its monetary needs. The bonds are a long-term liability for the company. The bonds are issued by the company to fulfill the cash needs to purchase assets.

Step 2: Calculation of the maturity date of the bonds

The maturity of the bonds is 60-days after the date of the issue.

May	16 Days
June	30 Days
July	14 Days
Total	60-Days

 

Hence, the maturity date of the bonds is July 14, 2017.

Step 3: Journal entries

Date	Particulars	Debit	Credit
May 15, 2017	Cash	$110,000
	12% Notes Payable		$110,000
	(Being entry for the issue of bond)
July 14, 2017	12% Bonds Payable	$110,000
	Interest Expense	$2,200
	Cash		$112,200
	(To record the payment of the bonds at maturity)

 

 

1.    The maturity date of the bonds is July 14, 2017.

2.    The interest expense at the maturity of the bonds is $2,200.