Sassy, Inc. has a 12 month, 4% Note Payable with a face value of $150,000, dated

Question

Sassy, Inc. has a 12 month, 4% Note Payable with a face value of $150,000, dated December 1, 2010 On 12/1/2011, when Sassy Inc. pays the full amount of the note, the Interest Payable account has   a balance of $5,500. Please use the space provided below to record the journal entry on 12/1/2011 when the note is paid in full. Sassy, Inc. has a 12 month, 4% Note Payable with a face value of $150,000, dated December 1, 2010 On 12/1/2011, when Sassy Inc. pays the full amount of the note, the Interest Payable account has   a balance of $5,500. Please use the space provided below to record the journal entry on 12/1/2011 when the note is paid in full.

Explanation / Answer

On December 1 Sassy. Inc has a 12 month, 4% note payable face value of $150.000

> December1, 2010

                                                    Debit      Credit

Cash                                        150,000

Notes Payable                                         150,000

Year end accural of interest

Intereste Expense (150,000 * 4% * 1/12) 500

Interest Payable                                                        500

Now on 12th january, 2011

Repayment of note and interest

Notes Payable - 150,000$

Interest Payable - 500$

Interest Expense - (150000 * 4% * 12/360) = 200$

                                                                                      150,700 $

Now paying the full amount by having an interest payable amount of 5500$

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