Chapter 9, Problem 4E

Interest-bearing notes payable with year-end adjustments P1

Keesha Co. borrows $200,000 cash on November 1, 2016, b signing a 90-day, 9% note with a face value of $200,000.

1. On what date does this note mature?
2. How much interest expense results from this note in 2016? Assume a 360-day year.)

Check (2) $3,000

3. How much interest expense results from this note in 2017? (Assume a 360-day year.)

Check (3) $1,500

4. Prepare journal entries to record (a) issuance of the note, (b) accrual of interest at the end of 2016, and (e) payment of the note at maturity. (Assume no reversing entries are made.)