Chapter 11, Problem E11.15E

To determine

Notes payable and Interest on notes payable: Notes payable is a source for short-term financing needs. The notes payable can be both short-term as well as long-term. But when the business needs to fulfil short-term financing needs, it prefers to issue short-term notes payable generally of maximum one year. The notes payable are issued with interest due on them, which is paid on maturity. The interest expense is calculated using the following formula –

$Interest Expense=\frac{Notes Payable X Rate of Interest X Number of Months }{12 months}$

To prepare:

Journal entries for the provided transactions.