Question

On November 1, Alan Company signed a 120-day, 9% note payable, with a face value of $18,000. Alan made the appropriate year-end accrual. What is the journal entry as of March 1 to record the payment of the note assuming no reversing entry was made? (Use 360 days a year.)

Multiple Choice

• Debit Notes Payable $18,000; debit Interest Expense $540; credit Cash $18,540.

• Debit Notes Payable $18,000; debit Interest Payable $270; debit Interest Expense $270; credit Cash $18,540.

• Debit Cash $18,270; credit Notes Payable $18,270.

• Debit Notes Payable $18,540; credit Interest Payable $270; credit Interest Expense $270; credit Cash $18,000.

• Debit Notes Payable $18,000; debit Interest Payable $270; credit Cash $18,270.

Answer 1

Interest payable on December 31 = 18,000 x 9% x 60/360

= $270

Interest expense on March 1 = 18,000 x 9% x 60/360

= $270

Following journal entry will be made on March to record the payment of note:

Date	General Journal	Debit	Credit
March 1	notes payable	18,000
	Interest payable	270
	Interest expense	270
	Cash		18,540

Second option is correct option.

Kindly comment if you need further assistance.

Thanks‼!