On December 15, 2018, Carboy, Inc., borrows $120,000 cash from Third National Bank at 9 percent annual interest. The note is due in 45 days.

Question

On December 15, 2018, Carboy, Inc., borrows $120,000 cash from Third National Bank at 9 percent annual interest. The note is due in 45 days. At December 31, 2018, Carboy records any unpaid interest with an adjusting entry. On January 30, 2019, Carboy pays the principal and interest owed on the bank note.

in progress 0
Phúc Điền 3 years 2021-07-28T01:03:23+00:00 1 Answers 151 views 0

Answers ( )

    0
    2021-07-28T01:04:31+00:00

    EXPLANATION

    Let’s see the facts:

    DECEMBER 15 ——->

    Carboy borrow = $120,000

    Annual interest=9%=0.09(in decimal form)

    Note expiration =45 days

    DECEMBER 31———-> 16 days after

    carboy records   an adjusting entry

    Considering that 360 days =1 year

    Interest expense = (borrow amount*annual interest rate in decimal)* (considering days /360)

    Now, we need to calculate the compounding amount as shown as follows:

    Interest Expense (debit) 450 (note-1)

                  Interest payable (credit ) 450

    Interest expense = (borrow amount* annual interest rate in decimal*)(c)

    Now , replacing terms:

    Interest expense= ($120,000* 0.09)*(15/360)=$10,800*1/24= $450

    Now, Since the maturity date is 45 days,

    The journal entry to record the interest plus principal paid-

    Date             Particulars

                        Credit

    Debit

    Jan-30,2020   interest Expense

    900                  

                             Interest payable

    450                    

                              Notes payable

    120,000

                           Cash

    121,350  

    The interest expense to be payable for this month = $(120,000*0.09)/12= $900

    Since there is interest due to 450, as the payment is made, the  interest payable become debit.

    PLEASE MARK ME AS BRAINLIEST

Leave an answer

Browse

Giải phương trình 1 ẩn: x + 2 - 2(x + 1) = -x . Hỏi x = ? ( )