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12 April, 16:40

Cosimo Enterprises issues a $260,000, 45-day, 5% note to Dixon Industries for merchandise inventory. Assume a 360-day year. For a compound transaction, if an amount box does not require an entry, leave it blank.

a) Journalize Cosimo Enterprises' entries to record: the issuance of the note. the payment of the note at maturity.

b) Journalize Dixon Industries' entries to record: the receipt of the note. the receipt of the payment of the note at maturity.

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  1. 12 April, 18:09
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    Cosimo Enterprises

    cash 260,000 debit

    note payable 260,000 credit

    --to record issuance of the note--

    note payable 260,000 debit

    interest expense 1,625 debit

    cash 261,625 credit

    --to record honor of the note--

    Dixon Industries

    note receivables 260,000 debit

    cash 260,000 credit

    --to record reception of a note--

    cash 261,625 debit

    note receivable 260,000 credit

    interest reenue 1,625 credit

    --to record honor of the note--

    Explanation:

    principal x rate x time = interest

    where time and rate must be express in the same metric.

    In this case portion of a 360 year

    260,000 x 0.05 x 45/360 = 1,625

    At maturity we write-off the note account and reocgnize the interest expense/revenue depending on which side we are.

    if we issued the noe, we are doin an interest expense.

    If we have the note we receive the cash get interest revenue.
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