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On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date?

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hyderali230

Answer:

                                 Dr.         CR.

May 22

Note Payable        $7,500

Interest Expense   $150

Cash                                     $7650

Explanation:

At the time of maturity the principal amount and the tax on the note  will be paid.

Value of Note signed = $7,500

Interest on Note = $7500 x 8% x 90 / 360 (assuming 360 days in a year)

Interest on Note = $150

Total Cash Payment = Principal + Interest

Total Cash Payment = $7,500 + $150

Total Cash Payment = $7,650

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