On September 1, 2016, a company issued a $50,000, 6-month, 9% note payable to pu

Question

On September 1, 2016, a company issued a $50,000, 6-month, 9% note payable to purchase equipment. At December 31, 2016, the company records an adjusting entry to accrue interest incurred by not paid. The company pays the note with interest at the maturity date.

Use the information above to answer the following question. What is the entry to record the payment of interest at the maturity date of the note?

Explanation / Answer

1 note payable amount 50000 time period months interest rate 9% number of months from september to december 4 number of months from january to february 2 the company recorded the interest expenses till december interest for 4 months 50000 * 9 % * 4 / 12 1500 the interest expenses for 2 months 50000 * 9 % * 2 / 12 750 the company at the time of recording the interest expenses in december debited the interest expenses and credited the interest payable account now at the time of maturity the company should debit the interest expenses for 2 months and interest payable account created in december and credit the cash account answer Debit Interest Payable for $1,500, debit Interest Expense for $750, and credit Cash for $2,250

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