value 052 polnts E102 Recording a Note Payable through Its T

value: 0.52 polnts E10-2 Recording a Note Payable through Its Time to Maturity [LO 10-2] Many businesses borrow money during periods of increased business activity to finance inventory and accounts receivable. Target Corporation is one of Americas largest general merchandise retailers. Each Christmas, Target builds up its inventory to meet the needs of Christmas shoppers. A large portion of Christmas sales are on credit. As a result, Target often collects cash from the sales several months after Christmas. Assume that on November 1, 2015, Target borrowed $7.5 million cash from Metropolitan Bank and signed a promissory note that matures in six months. The interest rate was 6.50 percent payable at maturity. The accounting period ends December 31. Required 1,2&3. Complete the required journal entries to record the note on November 1, 2015, interest on the maturity date, April 30, 2016, assuming that interest has not been recorded since December 31, 2015. (Enter your answers in whole dollars. If no entry is required for a transactionlevent, select \"No Journal Entry Required\" in the first account field.)

Solution

Journal entry :

Date	account & explanation	debit	credit
Nov 1	Cash	7500000
	Notes payable		7500000
	(To record amount borrow)
Dec 31	Interest expense (7500000*6.5%*2/12)	81250
	Interest payable		81250
	(To record accured interest)
Apr 1	Notes payable	7500000
	Interest payable	81250
	Interest expense	162500
	Cash		7743750
	(To record repayment)