Falconer Products, Inc. borrowed $660,000 by issuing a five-month note on Octobe

Question

Falconer Products, Inc. borrowed $660,000 by issuing a five-month note on October 1 of the current year. The note is due on March 1 of the following fiscal year. The short-term note carries a 12% annual interest rate with interest due at maturity The company's fiscal year ends on December 31. Prepare the journal entry required to record Falconer's full payment of the note at maturity. (Record debits first, then credits. Exclude explanations from any journal entries.) Account March 1 (following year)

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit March 1 Notes payable 660000 Interest payable (660000*12%*3/12) 19800 Interest expense (660000*12%*2/12) 13200       Cash 693000 (To record payment of note)

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