On November 1 Alan Company signed a 120day 9 note payable wi

On November 1, Alan Company signed a 120-day, 9% note payable. with a face value of $24,000. 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? (Use 360 days a year.) Multiple Choice Debit Cash $24,360; credit Notes Payable $24,360 Debit Notes Payable $24,720, credit Interest Payable $360; credit Interest Expense $360: credit Cash $24,000. Debit Notes Payable $24,000, debit Interest Payable $360; credit Cash $24,360. Debit Notes Payable $24,000; debit Interest Expense $720. credit Cash $24.720 Debit Notes Payabie $24000: debit interest 6,of 27, ??? Next >

Solution

Answer

A

Notes Payable

$                             24,000.00

B

Interest rate

9%

C = A x B

360 days Interest (Annual Interest)

$                               2,160.00

D = C x 120/360

120 days Interest expense

$                                   720.00

E

No. of days from 1 Nov to 31 Dec

60

F = D x E/360

Interest expense (accrued as payable) on 31 Dec

$                                   360.00

G

Remaining no. of days

60

H = D x G/360 or D - F

Interest expense for remaining period

$                                   360.00

Date

Accounts title

Debit

Credit

31-Dec

Interest expense

$                                   360.00

Interest payable

$                     360.00

(interest payable accrued on year end)

01-Mar [ANSWER ENtry]

Notes Payable

$                             24,000.00

Interest expense

$                                   360.00

Interest payable

$                                   360.00

Cash

$               24,720.00

(cash paid on maturity)

Correct answer, based on Journal entry #2 above on 1^st Mar, is Option #5:

Debit Notes Payable $ 24,000
Debit Interest Expense $ 360
Debit Interest payable $ 360
Credit Cash $ 24,720

A	Notes Payable	$                             24,000.00
B	Interest rate	9%
C = A x B	360 days Interest (Annual Interest)	$                               2,160.00
D = C x 120/360	120 days Interest expense	$                                   720.00
E	No. of days from 1 Nov to 31 Dec	60
F = D x E/360	Interest expense (accrued as payable) on 31 Dec	$                                   360.00
G	Remaining no. of days	60
H = D x G/360 or D - F	Interest expense for remaining period	$                                   360.00