On May 22,Jarrett Company borrows $7,500 from Fairmont Financing,signing a 90-day,8%,$7,500 note.What is the journal entry needed to record the payment of the note by Jarrett Company on the maturity date?
A)Debit Notes Payable $7,500;credit Interest Expense $150;credit Cash $7,350.
B)Debit Notes Payable $7,500;credit Cash $7,500.
C)Debit Notes Payable $7,650;credit Cash $7,650.
D)Debit Notes Payable $7,500;debit Interest Expense $150;credit Cash $7,650.
E)Debit Cash $7,650;credit Interest Revenue $150;credit Notes Receivable $7,500.

Question

Quizplus · Accepted Answer

The journal entry should include debiting Notes Payable for the principal amount of $7,500, debiting Interest Expense for the interest of $150 (calculated as $7,500 * 8% * 90/360), and crediting Cash for the total payment of $7,650.

On May 22,Jarrett Company Borrows $7,500 from Fairmont Financing,signing a 90-Day,8%,$7,500