A business issued a 45-day note for $99,000 to a creditor on account. The note was discounted at 7%. Journalize the entries to record (a) the issuance of the note on March 1 and (b) the payment of the note at maturity. Assume a 360-day year.

The Journal entries are as follows:

(i) Account payable A/c Dr. $99,000

To notes payable $99,000

(To record issue note payable)

(ii) Notes payable A/c Dr. $99,000

Interest Expense A/c Dr. $866

To cash A/c $99,866

(To record payment of note at maturity)

Working Notes:

Interest Expense = $99,000 * 7% * (45 : 360)

= $99,000 * 7% * 0.125

= $866