20. On December I, Gates Company borrowed S45,000 cash from FirstBank by signing

Question

20. On December I, Gates Company borrowed S45,000 cash from FirstBank by signing a 90- day, 9% note payable. Four (4) points a. Prepare Gate's journal entry, including journal entry explanation, to record the issuance of the note payable. b. Prepare Gate's journal entry, including jounal entry explanation, to record the accrued interest due at December 31 c. Prepare Gate's journal entry, including journal entry explanation, to record the payment of the note on March I of the next year. DateAccount Titles and Explanation Debit Credit

Explanation / Answer

Date Journal Debit Credit 1-Dec Cash A/c………Dr                                45,000                   to Notes Payable                                 45,000 ( being cash received on account of note being issued ) 31-Dec Interest expense A/c ……..Dr                                337.50              To Accrued Interest                                 337.50 ( being (9% interest accued on the notes for one month ) 1-Mar Interest expense A/c ……..Dr                                675.00              To Accrued Interest                                 675.00 ( being (9% interest accued on the notes for two months ) 1-Mar Accrued Interest A/c ….. Dr                            1,012.50 Notes payable A/c …….Dr                                45,000                To Cash Payable                           46,012.50 ( Being notes repaid along with the interest accrued for three months) ( total interest accrued = 337.50 + 675)

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