On September 1, Knack Company signed a $50,000, 90-day, 5% note payable with Cen

Question

On September 1, Knack Company signed a $50,000, 90-day, 5% note payable with Central Savings Bank. What is the journal entry that should be recorded by Knack upon maturity of the note? (Use 360 days a year.)

Multiple Choice

Debit Interest Expense $625; credit Interest Payable $625.

Debit Notes Payable $50,000; credit Interest Revenue $625; credit Cash $49,375.

Debit Cash $50,625; credit Notes Receivable $50,625.

Debit Notes Payable $50,625; credit Cash $50,625.

Debit Notes Payable $50,000; debit Interest Expense $625; credit Cash $50,625.

Explanation / Answer

journal entry that should be recorded by Knack upon maturity of the note

so answer is e) Debit Notes Payable $50,000; debit Interest Expense $625; credit Cash $50,625.

Date accounts & explanation debit credit Notes payable 50000 Interest expense (50000*5%*90/360) 625      Cash 50625 (To record maturity of note)

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