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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for discounted note payable

A business issued a 45-day note for $80,000 to a creditor on account. The note was discounted at 5%. Journalize the entries to record (a) the issuance of the note and (b) the payment of the note -at maturity.

A.

To determine

Note Payable: Note payable is an obligation of the business to pay to its creditors, in future for the benefits received that carry some interest.

To journalize: Issuance of the note.

Explanation

Working note:

Calculate the amount of interest expense.

Interest Expense = Note Payable×Interest (discounted) rate×Interest timeperiod                          = $80,000×5%

B.

To determine

To journalize: The payment of note at maturity.

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