Question

On November 1, 2021, Aviation Training Corp. borrows $51,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 6% note payable. Interest is payable at maturity. Aviation’s year-end is December 31. Required: 1.-3. Record the necessary entries in the Journal Entry Worksheet below.Record the issuance of note.Record the adjustment for interest.Record the repayment of the note at maturity.

Answer 1

Answer:

The Journal entries are as follows:

1. Issuance of note :

Cash A/c     Dr. $51,000

To Note payable            $51,000

(To issuance of note)

2. Adjustment for interest :

Interest expense ($51,000 × 6% × 2/12) A/c   Dr. $510

To Interest payable A/c                                                  $510

(To record the adjustment for interest)

3. Repayment of note :

Note payable A/c                                            Dr. $51,000

Interest payable A/c                                        Dr. $510

Interest expense ($51,000 × 6% × 1/12) A/c  Dr. $255

To cash A/c                                                                      $51,765

(To record the repayment of the note at maturity)