I
On October 17, a note payable is used to replace a $90,000 overdue account payable that does not bear
interest. The customer agrees to pay $25,000 cash and sign a 60-day, 15% note to replace the account
payable.
The customer's entry to record this transaction would be:
Particulars
Debit
On December 31, the customer's year end, an interest accrual is made.
The customer's entry to record this accrual would be:
Particulars
Debit
On January 16, the note's due date, the note and interest is paid in full.
The customer's entry to record this would be:
Particulars
Debit
Credit
Credit
Credit