In november 1, alan company signed a 120-day, 10% note payable, with a face value of $27,000. alan made the appropriate year-end accrual. what is the journal entry as of march 1 to record the payment of the note assuming no reversing entry was made? (use 360 days a year.)

The journal entry as of march 1 will be:

Debit Notes payable $27,000

Debit Interest payable $450

Debit Interest Expense $450

Credit Cash $27,900

Explanation:

payable amount = $27,000

 Issued on 1st Nov

 Term = 120 days

 Maturity on 1st march.

Days from 1st Nov to 31st Dec = 60 days

 Days from 1st Jan to 1st March = 60 days

 Total 61 + 59 = 120 days

Interest expense from 1st Nov to 31st Dec

 = 27000 x 10% x 60/360

 = $ 450

 This $450 has been debited as Interest expense and Credited as   Interest payable on Year end Accrual.

Interest expense from 1st Jan to 1st March

 = 27000 x 10% x 60/360

 = $450

One maturity, 1st March, cash payment would include $27000  (amount of notes payable) + $900 (interest amount = 27000 x 10% x  120/360).

Total cash payment = $ 27,900

This cash payment of $27,900 will be credited.

Interest expense (1st jan to 1st march) of $450 will be debited.

 Interest payable (1st Nov to 31st Dec) of $450 will be debited, and

 Notes payable amount of $27,000 will also be debited.

Therefore , The journal entry as of march 1 will be:

Debit Notes payable $27,000

Debit Interest payable $450

Debit Interest Expense $450

Credit Cash $27,900

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