Question

Question 2 (32 marks) On December 1, Gates Company borrowed $45,000 cash from FirstBank by signing a 90-day, 9% note payable. a. Prepare Gate's journal entry to record the issuance of the note payable. b. Prepare Gate's journal entry to record the accrued interest due at December 31. c. Prepare Gate's journal entry to record the payment of the note on March 1 of the next year.

Answer 1

Answer

--Journal entries

Date	Accounts title	Debit	Credit
1 Dec Year 1	Cash	$45,000
	Notes Payable		$45,000
	(to reocrd issuance)
31 Dec Year 1	Interest Expense ($ 45000 x 9% x 30 days/360 days)	$338
	Interest Payable		$338
	(to record accrual of 30 days interest)
1 Mar Year 2	Notes Payable	$45,000
	Interest Payable	$338
	Interest Expense ($45000 x 9% x 60 days/360 days)	$675
	Cash		$46,013
	(to record payment at maturity)