Bondi Bank agrees to lend Tawonga Construction Company Ltd $200,000 on 1 January. Tawonga Construction Company Ltd signs a $200,000, 4%, 9-month note.
-What entry will Tawonga Construction Company Ltd make to pay off the note and interest at maturity?

Question

Quizplus · Accepted Answer

The interest to 30 June has been accrued. The correct entry will record a debit to Interest payable to release the liability; a debit to interest expense for interest from 1 July to 30 September and lastly a credit to cash to record the payment to the Bank.

Bondi Bank Agrees to Lend Tawonga Construction Company Ltd $200,000