Answer: Please see explanation column for answer
Explanation:
A) To record the issuance of note
Date Account title Debit Credit
Oct 1 2014 Cash $290,000
Notes Payable $290,000
B) To record the accrued interest for 3 months
Date Account title Debit Credit
Dec 31 2014 Interest expense $7,250
Interest Payable $7,250
Calculation:
Interest expense : Principal x rate x period (time)
$290,000 x 10%x 3/12 ( from oct - dec)
=$7,250
Based on the information given the appropriate journal entries to record the transactions are:
a. Oct 1 2014
Debit Cash $290,000
Credit Notes Payable $290,000
(To record the issuance of note)
b. Dec 31 2014
Debit Interest expense $7,250
Credit Interest Payable $7,250
($290,000 x 10%x 3/12)
(To record the accrued interest)
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