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On November 1, Bahama Cruise Lines borrows $4 million and issues a six-month, 6% note payable. Interest is payable at maturity. Record the issuance of the note and the appropriate adjustment for interest expense at December 31, the end of the reporting period. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5 should be entered as 5,000,000).)

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jepessoa

Answer:

November 1, issuance of the Note

  • Dr Cash account 4,000,000
  • Cr Notes Payable account 4,000,000

December 31, interest adjustment

total note value x (months / 12) x interest rate = $4,000,000 x (2 / 12) x 6% = $40,000

  • Dr Interest Expense account 40,000
  • Cr Interest Payable account 40,000

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