The note payable relating to the June 2, and 10 transactions is a five-year note
ID: 2380580 • Letter: T
Question
The note payable relating to the June 2, and 10 transactions is a five-year note, with interest at the rate of 12% annually. Interest expense should be computed based on a 360 day year.
The original note on the June 2 purchase was $132,000. On June 10, eight days later, $25,250 was repaid. Interest expense must be calculated on the $132,000 for eight days. In addition, interest expense on the $106,750 balance of the loan ($132,000-$25,250=$106,750) must be calculated for the 20 days remaining in the month of June.
Explanation / Answer
June 2
Debit Computer Equipment $140,000
Credit Cash $28,000
Credit Notes Payable $112,000
June 10
Debit Notes Payable $21,500
Credit Cash $21,500
Edited to add:
Interest Expense recorded on December 31 would be
$112,000 x 12% x 8/360 = $ 298.67
Plus ($112,000 - $21,500 paid) x 12% x 200/360 = $6,033.33
Total $6,332.00
June 2 - June 10 is 8 days
July - December is 180 days plus 20 days in June = 200 days
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.