Watauga County Bank agrees to lend Farm Café $500000 on January 1 2021.Farm Café signs a $500000 6% 9-month note.Use the following tabular analysis to record the pay off of the note and interest at maturity assuming that interest has been accrued to September 30:

Question

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The note was issued on January 1 and matures after 9 months, which is September 30. The interest will be accrued for 9 months at 6%, which is $22500 (($500000*6%)/12*9)). At maturity, Farm Café will have to pay back the principal amount of $500000 and the accrued interest of $22500, which sums up to $522500. Therefore, at maturity, there will be a decrease to Notes Payable for $500000, a decrease to Interest Payable for $22500, and a decrease to Cash for $522500.

Watauga County Bank Agrees to Lend Farm Café $500000 on January