notes payable journal entries

Notes payable journal entry | PU 2016 spring

Notes payable journal entry

Financial Accounting-ii – Receivable

Pokhara University (PU) 2016 Spring Q. No. 15

On magh 1, 2072 Pokhara Trading House borrowed Rs. 10,00,000 from the Nepal Investment Bank. This House signed a 6 month, 9% promissory note for the entire amount. It uses a calendar year end.

Required: What adjustments would be made on the year end? Also show the journal entries for the payments of principal and interest on the due date. [10]

Solution:

Journal Entries

In the book of Pokhara Trading House

Chaitra 31, 2072

Interest expenses a/c Rs. 22,500

Interest payable a/c             Rs. 22,500

(To record the interest on notes for the three months)


Ashad 31, 2073

Interest expenses a/c Dr. Rs. 22,500

Interest payable a/c Dr. Rs. 22,500

Notes payable a/c Dr.   Rs. 10,00,000

Cash a/c                                     Rs. 10,45,000

(To record the payments of notes payable, interest payable, and interest expenses)


Here, in notes payable journal entry,

Interest expenses for three months = 9% of Rs. 10,00,000 × 3/12 = Rs. 22,500

See related solutions

(PU) 2016 Spring Q. No. 11, Account receivable method

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