ACCT 201 Principles of Financial Accounting Practice Exam - Chapter 9 Reporting & Analyzing Current Liabilities Dr. Fred Barbee Solution to Short-Problem #2

Short Problem #2

On December 1, 2002 Expo Company borrowed $45,000 cash from First National Bank. The terms of the note were 90 days at 9%.

a. Prepare the journal entry for Expo to record the notes issuance. Cash 45,000   Notes Payable   45,000

b. Prepare the journal entry for Expo to record the accrued interest due as of December 31, 2002. Interest Expense ($45,000 x .09 x 30/360) 337.50   Interest Payable   337.50

c. Prepare the journal entry for Expo to record the payment of the note on March 1, 2003. Note Payable 45,000.00   Interest Payable 337.50   Interest Expense ($45,000 x .09 x 60/360) 675.00   Cash   46,012.50